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UNITED STATES File No. 333-01973
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-07573
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 2
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Post Effective Amendment No. [ ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No 2 [ ]
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Sage/Tso Trust
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(Exact name of Registrant as Specified in Charter)
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
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(Address of Principal Exec (Zip Code)
Registrant's Telephone Number, including Area Code (703) 847-6792
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James C. Tso, President
Sage/Tso Investment Management L.P.
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
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(Name and Address of Agent for Service)
COPIES TO:
Clifford J. Alexander, Esq. Joseph M. O'Donnell, Esq.
Kirkpatrick & Lockhart LLP Fund/Plan Services, Inc.
1800 Massachusetts Avenue, N.W. 2 West Elm Street
Washington, DC 20036-1800 Conshohocken, Pennsylvania 19428
Approximate date of proposed public
offering: As soon as practicable after the effective date
of this Registration Statement.
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Registrant has previously elected to register an indefinite number of shares of
its securities under this Registration Statement pursuant to Rule 24f-2 of the
Investment Company Act of 1940, as amended. Registrant will file a Notice
pursuant to Rule 24f-2 within two months after the fiscal year end.
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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 this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
As filed with the U.S. Securities and Exchange TOTAL PAGES:
Commission on June 26, 1996 INDEX TO EXHIBITS, PAGE:
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TABLE OF CONTENTS
Registration Statement of Sage/Tso Trust
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Page
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<S> <C>
1. Cross-Reference Sheet...................................................................................3
2. America Asia Allocation Growth Fund - Part A - Prospectus...............................................5
3. America Asia Allocation Growth Fund - Part B - Statement of Additional Information.....................27
4. America Asia Allocation Growth Fund - Part C - Other Information.......................................40
5. Signature Page.........................................................................................44
6. Index to Exhibits......................................................................................45
</TABLE>
2
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<TABLE>
<CAPTION>
SAGE/TSO TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
Form N-1A Item Caption in Prospectus
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Part A INFORMATION REQUIRED IN A PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense Summary
3. Condensed Financial Information *
4. General Description of Registrant Investment Objective and Policies; Risk Factors;
Prospectus Summary; The Trust and the Fund;
Investment Limitations; Description of Permitted
Investments and Risk Factors; General Information
5. Management of the Fund Prospectus Summary; Management of the Fund;
Distribution Plan
5A. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities Prospectus Summary; General Information;
Dividends and Taxes; Net Asset Value
7. Purchase of Securities Being Offered Prospectus Summary; How to Purchase Shares;
Shareholder Services
8. Redemption or Repurchase Prospectus Summary; How to Redeem Shares
9. Pending Legal Proceedings *
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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10. Cover Page Cover Page of the Statement of Additional
Information
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objectives and Policies Investment Policies and Techniques; Investment
Restrictions; Portfolio Transactions
14. Management of the Fund The Trust; Investment Advisory and Other Services;
Trustees and Officers
15. Control Persons and Principal Holders of
Securities *
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions
3
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Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
(continued)
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing of
Securities Being Offered Purchases; Redemptions
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Performance Information
23. Financial Statements *
Part C OTHER INFORMATION
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Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
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<FN>
* Item is inapplicable at this time or answer is negative.
</FN>
</TABLE>
4
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AMERICA ASIA ALLOCATION GROWTH FUND
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
PROSPECTUS June __, 1996
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America Asia Allocation Growth Fund (the "Fund") seeks maximum long-term capital
growth by investing in the equity securities of companies located in the
"Greater Asia Region", as well as in the United States and Canada. Under normal
circumstances, the Fund will invest at least 65% of its total assets in such
securities. The Adviser defines the "Greater Asia Region" to include China, Hong
Kong, India, Indonesia, Japan, Malaysia, Pakistan, The Philippines, Singapore,
South Korea, Taiwan and Thailand. The Fund will focus on both American (U.S. and
Canada) and Asian companies that are expected to benefit from the development
and growth of the economies of the countries located in the "Greater Asia
Region".
In addition, the Adviser has established guidelines that allow it to give
priority to investing in companies that, in its opinion, show an effective
employment of Asian American talent in management, science or technology. The
Fund is designed for long-term investors and not as a trading vehicle, and is
not intended to present a complete investment program. See "Investment Objective
and Policies".
The Adviser has also established certain guidelines which currently prohibit the
Fund from investing in companies that supply products or services that are
harmful to humans or engage in labor practices that violate human rights. See
"Investment Objective and Policies".
The Fund is a separate series of Sage/Tso Trust (the "Trust"), an open-end,
diversified management investment company commonly known as a mutual fund.
Sage/Tso Investment Management L.P. (the "Adviser") serves as the investment
adviser of the Fund managing its assets in accordance with its investment
objectives.
The Fund offers its shares through two separate classes of shares: Class A
Shares and Class D Shares. Both classes of shares are identical except as to the
expenses borne by each class. These alternative classes permit investors to
choose the method of purchasing shares most beneficial to them.
This Prospectus sets forth concisely the information regarding the Fund that an
investor should know before investing in the Fund. Investors should read this
Prospectus and retain it for future reference. A Statement of Additional
Information dated June __, 1996, which may be revised from time to time,
provides a further discussion of certain areas which may be of interest to some
investors. It has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. To request a copy, write to the Fund at the
address above or call (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.
5
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TABLE OF CONTENTS
Page
Prospectus Summary.............................................................7
Expense Summary................................................................8
The Trust and the Fund.........................................................9
Investment Objective and Policies..............................................9
Risk Factors..................................................................10
Management of the Fund........................................................12
The Distribution Plans........................................................14
How to Purchase Shares........................................................14
Purchase of Class D Shares...............................................16
Purchase of Class A Shares...............................................16
How to Redeem Shares..........................................................17
Shareholder Services..........................................................19
Net Asset Value...............................................................19
Dividends and Taxes...........................................................20
Performance Information.......................................................21
General Information...........................................................22
Description of Permitted Investments and Risk Factors.........................23
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Sage/Tso Investment Management L.P.
2 W. Elm Street 7799 Leesburg Pike, Suite 900
Conshohocken, Pennsylvania 19428 Falls Church, Virginia 22043
(800)______ (800)_________
(610)______ (703) 255-1233
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS.
6
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PROSPECTUS SUMMARY
What is the Fund's Investment Objective? America Asia Allocation Growth Fund
(the "Fund") seeks to achieve long-term capital growth. There can be no
assurance that the Fund will be able to achieve its investment objective.
See "Investment Objective and Policies".
What are the Permitted Investments? The Fund intends to invest substantially all
its assets in equity securities of companies located in the "Greater Asia
Region", as well as in the United States and Canada. The Adviser defines the
"Greater Asia Region" to include China, Hong Kong, India, Indonesia, Japan,
Malaysia, Pakistan, The Philippines, Singapore, South Korea, Taiwan and
Thailand. The Fund will focus on both American and Asian companies that are
expected to benefit from the development and growth of the economies of the
countries located in the "Greater Asia Region". In addition, any company in
which the Fund invests must, in the opinion of the Adviser, conduct business in
accordance with the stated philosophy of the Fund. The Fund initially intends to
invest most of its assets in common stocks and sponsored or unsponsored American
Depository Receipts. See "Investment Objective and Policies" and "Description of
Permitted Investments and Risk Factors".
What is the stated philosophy of the Fund? In addition to the fundamental
investment objective of the Fund, the Adviser has established certain guidelines
which currently prohibit the Fund from investing in companies that supply
products or services that are harmful to humans or engage in labor practices
that violate human rights. See "Investment Objective and Policies".
What priority investment may the Fund make? The Adviser may give priority to
investments in companies that meet its investment criteria and which demonstrate
an effective employment of Asian American talent in management, science or
technology. See "Investment Objective and Policies".
What are the Risks Involved with an Investment in the Fund? The investment
policies of the Fund have certain risks and considerations of which investors
should be aware. The Fund invests in securities that fluctuate in value, and
investors should expect the Fund's net asset value per share to fluctuate.
Investing in the equity securities of foreign companies involves special risks
and considerations not typically associated with investing in the equity
securities of U.S. companies. The securities markets in the Greater Asia Region
(with the exception of Japan) and other emerging markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. There may be different accounting standards, differences in
securities regulation, higher brokerage costs, currency exchange rate
fluctuations and conversion costs, and less publicly available information about
foreign companies and securities issued thereby. See "Investment Objective and
Policies", "Risk Factors" and "Description of Permitted Investments and Risk
Factors".
Who is the Investment Adviser? Sage/Tso Investment Management L.P. serves as the
investment adviser of the Fund. See "Expense Summary" and "Management of the
Fund".
Who is the Administrator, Transfer Agent and Fund Accounting Agent? Fund/Plan
Services, Inc. serves as the administrator, transfer agent and fund accounting
agent for the Fund. See "Management of the Fund".
Who is the Distributor? Fund/Plan Broker Services, Inc. serves as the
distributor of the Fund's shares. See "Management of the Fund".
Is There a Sales Load? Purchases of Class A Shares are subject to a maximum
sales charge of 5.00%. Class D Shares are not subject to a sales charge. Both
classes of shares are subject to annual 12b-1 Plan expenses. See "The
Distribution Plans" and "How to Purchase Shares".
Is There a Minimum Investment? The minimum initial investment for Class A Shares
is $5,000 ($2,000 for IRA and SEP accounts) and $200 for subsequent investments.
The minimum initial investment for Class D Shares is $10,000 ($2,000 for IRA and
SEP accounts) and $200 for subsequent investments.
How do I Purchase Shares? Class D Shares are offered at net asset value per
share to registered investment advisers on behalf of their clients. Class A
Shares are offered at the net asset value per share plus a maximum initial sales
charge of 5.00% of the offering price. See "How to Purchase Shares".
How do I Redeem Shares? Shares of the Fund may be redeemed at the current net
asset value per share next
7
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determined after receipt by the transfer agent of a redemption request in proper
form. Signature guarantees may be required for certain redemption requests. See
"How to Redeem Shares".
How are Distributions Paid? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of annual
dividends. If any capital gains are realized, substantially all of them will be
distributed by the Fund at least annually. All dividends and distributions are
paid in additional shares (without sales charge) unless payment in cash is
requested. See "Dividends and Taxes".
8
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EXPENSE SUMMARY
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Shareholder Transaction Expenses:
Class A Class D
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Maximum sales charge imposed on purchases
(as a percentage of offering price)................................................. 5.00%(1) None
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price)....................................... None None
Deferred sales charge (as a percentage of
original purchase price)........................................................... None None
Redemption fees (as a percentage of
amount redeemed) (2)................................................................ None None
<FN>
(1) Reduced for purchases of $100,000 and over. See "How to Purchase Shares".
(2) If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $9.00) for each wire redemption. Purchases and
redemptions may also be made through broker-dealers and others who may
charge a commission or other transaction fee for their services.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses:
(as a percentage of average net assets) Class A Class D
- --------------------------------------- ------- -------
<S> <C> <C>
Advisory Fees (after fee waivers)(3)............................................... 0.71% 0.71%
12b-1 Fees......................................................................... 0.35% 0.35%
Other Expenses (4)................................................................. 1.69% 1.69%
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Total Fund Operating Expenses (after fee waivers)(3).............................. 2.75% 2.75%
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<FN>
(3) The Adviser has, on a voluntary basis, agreed to waive all or a portion of
its fees and to reimburse certain expenses of the Fund necessary to limit
the total operating expenses for the first year of operations to 2.75% of
the Fund's average net assets. The Adviser reserves the right to terminate
this waiver or any reimbursement at any time, in its sole discretion after
its first year of operation. Absent such waivers, advisory fees for the
Fund would be 2.00% and estimated total operating expenses would be 4.04%
of the Fund's average daily net assets on an annualized basis. Although the
Adviser has not previously provided investment advisory services to
registered investment companies, the Adviser has been engaged in the
investment advisory business and providing investment advice to
individuals, trusts and retirement plans since 1992.
(4) For purposes of this table, "Other Expenses" is based on estimated amounts
for the current fiscal year because the Fund has no operating history.
</FN>
</TABLE>
Example
Based on the level of expenses listed above, and (i) imposition of the maximum
sales charge for Class A Shares, (ii) 5% annual return and (iii) redemption at
the end of each time period, the total expenses relating to an investment of
$1,000 would be as follows:
Class A Class D
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1 Year $ 76 $ 28
3 Years $135 $ 85
The foregoing example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those shown. The
purpose of the expense tables and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by shareholders of the Fund. Additional information may be found under
"Management of the Fund". The rules of the Securities and Exchange Commission
require that the maximum sales charge be reflected in the above table with
respect to Class A Shares. However, certain investors may qualify for a reduced
sales charge. See "How to Purchase Shares".
Long-term holders of Class A Shares may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(the "NASD").
9
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THE TRUST AND THE FUND
Sage/Tso Trust (the "Trust") is an open-end, diversified management investment
company organized as a business trust under the laws of the State of Delaware.
The Trust is organized to offer separate series of shares and is currently
comprised of one series called America Asia Allocation Growth Fund (the "Fund").
The Fund currently offers two separate classes of shares and additional classes
of shares may be added without shareholder approval. Class A Shares and Class D
Shares differ with respect to sales charges and minimum initial investment.
Except for these differences, each share of the Fund represents an undivided
proportionate interest in the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital growth. This objective
is fundamental and may not be changed without a vote of the holders of the
majority of the outstanding voting securities of the Fund. The Fund's investment
policies described below are not fundamental and may be changed without
shareholder approval. Additional investment policies and restrictions are
described in the Statement of Additional Information.
The Fund seeks maximum long-term capital growth by investing in the equity
securities of companies located in the "Greater Asia Region", as well as in the
United States and Canada. Under normal circumstances, the Fund will invest at
least 65% of its total assets in such securities. The Adviser defines the
"Greater Asia Region" to include China, Hong Kong, India, Indonesia, Japan,
Malaysia, Pakistan, The Philippines, Singapore, South Korea, Taiwan and
Thailand. The Fund will focus on both American (United States and Canada) and
Asian companies that are expected to benefit from the development and growth of
the economies of the countries located in the "Greater Asia Region". The
countries constituting the Greater Asia Region may be changed by the Board of
Trustees without shareholder approval.
In addition, among the companies that meet the Adviser's investment criteria,
the Adviser has established guidelines that allow it to give priority to
investing in companies that, in its opinion, show an effective employment of
Asian American talent in management, science or technology. Among the companies
that meet the Adviser's investment criteria, the Adviser may give priority to
those that, in the Adviser's opinion, employ the talents of Asian Americans in
an effective manner. For example, these companies may have been founded or may
be managed by Asian Americans, or may utilize Asian Americans in important roles
in the research and development of scientific or technological advances. The
Board of Trustees may, from time to time, amend these priorities without
shareholder approval.
The Adviser also employs a specific philosophy in implementing the investment
objective of the Fund pursuant to certain guidelines established by the Adviser.
These guidelines prohibit the Fund from investing in companies that: (1) Supply
products or services that are harmful to humans. For example, the Fund will not
invest in companies that produce tobacco products, or (2) Engage in labor
practices that violate human rights. For example, the Fund will not invest in
companies that employ child labor. The Board of Trustees may, from time to time,
amend these guidelines without shareholder approval.
Equity securities include common and preferred stocks, convertible securities,
rights and warrants to purchase common stocks and sponsored and unsponsored
American Depository Receipts ("ADRs"), European Depository Receipts ("EDRs"), or
Global Depository Receipts ("GDRs")(collectively "Depository Receipts").
Initially, the Fund intends to invest primarily in Depository Receipts or other
similar securities representing an interest in securities of foreign issuers
rather than directly in the stock of those companies. The Fund also intends to
initially limit its purchase of non-U.S. stocks to those that may be purchased
on U.S. stock markets.
The Fund may also invest up to 35% of its total assets in other equity
securities, U.S. government securities, short-term money market instruments
(such as U.S. Treasury bills, commercial paper, certificates of deposit and
bankers'
10
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acceptances) and repurchase agreements. Debt securities convertible into common
stocks will be investment grade or, if unrated, will be comparable quality as
determined by the Adviser under the supervision of the Board of Trustees. See
"Description of Permitted Investments and Risk Factors".
The Fund will not limit its investments to any particular type of company. The
Fund may invest in companies, large or small, whose earnings are believed to be
in a relatively strong growth trend, or in companies in which significant
further growth is not anticipated and whose market value per share is thought to
be undervalued. The Fund may invest in small relatively less well-known
companies. These companies may present greater opportunities for capital
appreciation, but may also involve greater risk. See "Risk Factors".
The Adviser will consider an issuer of securities to be located in the Greater
Asia Region, United States or Canada to be those: (i) which are organized under
the laws of a country in those regions; (ii) which derive at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed in these regions or which have at least 50% of their assets situated
in these regions; or (iii) for which the principal securities trading markets
(including ADR's) are in these regions. The Adviser will determine if a company
meets any one of the above criteria through fundamental research, review of
existing public data on such companies, and through personal interviews and
visits to such companies.
There is no requirement that the Fund, at any given time, invest in any one
particular country or in all of the countries listed above or in any other Asian
countries. The Fund has no set policy for allocating investments between
American and Asian companies, nor among the various countries in the Greater
Asia Region. Allocation of investments among the various countries will depend
on the relative attractiveness of the stocks of issuers in the respective
countries. Government regulation and restrictions in many of the countries of
interest may limit the amount, mode and extent of investment in companies in
such countries.
The Fund may engage in foreign currency exchange contracts to protect the value
of its assets against future changes in the level of currency exchange rates.
Although the Fund has no present intentions to engage in transactions involving
the use of options and futures contracts, the Fund may engage in such
transactions for purposes of increasing its investment return or hedging against
market changes. The Fund may also buy and sell stock index futures contracts for
hedging purposes. Such instruments are generally considered to be derivative
securities. The total of all instruments deemed derivative in nature by the
Adviser will generally not exceed 20% of total assets of the Fund. See "Risk
Factors" and "Description of Permitted Investments and Risk Factors".
For temporary defensive purposes, the Fund may invest up to 100% of its total
assets in short-term U.S. investments, such as cash or cash equivalents,
commercial paper, short-term bank obligations, government and agency securities,
and repurchase agreements. To the extent that the Fund is invested in temporary
defensive instruments, it will not be pursuing its investment objective. See
"Description of Permitted Investments and Risk Factors" and the Statement of
Additional Information.
Although the Fund cannot accurately predict its portfolio turnover rate, under
normal circumstances the portfolio turnover rate is not expected to exceed 100%
per year. A portfolio turnover rate in excess of 100% may result in higher
transaction costs to the Fund and may increase the amount of taxes payable by
the Fund's shareholders.
For a further discussion of the Fund's permitted investments, see "Description
of Permitted Investments and Risk Factors" and the Statement of Additional
Information.
Investment Process
The Adviser employs a "top-down" assessment approach of countries, regions and
economies and a "bottom up" assessment approach of stocks within selected
sectors. The Adviser's approach in selecting investments for the Fund is value
driven. The best growth companies in both America and Asia will be considered
for investment by applying sound fundamental and technical analysis. The best
Asian American companies will also be considered for investment by the Adviser.
The Adviser considers some of the best growth companies to be those with
promising profit synergies, particularly those in America and Asia that have
mutually beneficial business connections.
11
<PAGE>
RISK FACTORS
Investments in securities of the Greater Asia Region may be subject to certain
risks not typically associated with securities of U.S. issuers. Because of its
emphasis on the Greater Asia Region, the Fund should be considered as a vehicle
for diversification of investments and not as a balanced investment program. See
"Description of Permitted Investments and Risk Factors". Although the Adviser
has not previously provided investment advisory services to registered
investment companies, the Adviser has been engaged in the investment advisory
business and providing investment advice to individuals, trusts and retirement
plans since 1992.
Greater Asia Region's Economy
In the past five years, the newly emerging securities markets in the Greater
Asia Region have had strong economic growth which has been reflected in stronger
market returns than those of Western Europe and the United States on average and
have demonstrated significant growth in market capitalization, in numbers of
listed securities and in volume of transactions. Over this same period, the
underlying economies of the region have grown against a background of high
savings rates and generally moderate inflation. There can be no assurance that
this strong economic growth will continue over the long term. Please see the
Statement of Additional Information under the Subheading "The Greater Asia
Region" for a more detailed discussion.
Greater Asia Region Opportunity
The Adviser believes that in contrast to more developed economies, the newly
industrialized countries of the Greater Asian Region are in an earlier, more
dynamic growth state of their development. This growth has been characterized
by, among other factors, low labor costs, strong demand from export markets for
consumer products, high productivity, long work weeks, pro-business governments
and a strong work ethic. Historically, South Korea, Hong Kong, Singapore and
Taiwan have been examples of these traits. Today, however, the economies of
Malaysia, Indonesia, Thailand, India, Australia, New Zealand, China and others
are starting to exhibit many of these same characteristics and appear to be
accelerating.
The Adviser acknowledges the existence of potential political uncertainty in
Asia that may impact on the liquidity and value of certain portfolio
investments. Currently, the Adviser is monitoring jurisdictional disputes
between the People's Republic of China and the Republic of China and between
South Korea and North Korea. The Adviser is also monitoring upcoming events in
Hong Kong. Hong Kong is a British colony which will transfer sovereignty to the
Peoples Republic of China in 1997. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise and has established stock
exchanges of its own.
The Adviser believes that these uncertainties, as of the date of this
prospectus, will not have a long-term negative impact on the value of an
investment in the Fund. The Adviser further believes that vigilant monitoring of
events in the Greater Asia Region may mitigate a temporary period of
instability.
Many of the stock markets of the Greater Asia Region are either fully open for
foreign investors or are in the process of opening. The Adviser believes that
the opening of these markets offers particular opportunities for investment.
Foreign Securities
Investing in foreign securities generally involves somewhat different investment
risks from those affecting securities of U.S. issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing, and financial
and other reporting standards and requirements comparable to those applicable to
domestic companies. Therefore, disclosure of certain material information may
not be made and less information may be available to investors investing in
foreign companies than in the U.S. There may also be less government supervision
and regulation of foreign securities exchanges, brokers and listed companies
than in the U.S. Many foreign securities markets have substantially less volume
than U.S. national securities exchanges, and securities of some foreign issuers
are less liquid and subject to greater price volatility. Brokerage commissions
and other transaction costs on foreign securities exchanges are generally higher
than in the U.S. Dividends and interest paid by foreign issuers may be subject
to withholding and other foreign taxes, which may decrease the net return on
foreign investments. Additional risks include future adverse political and
economic developments, the possibility that a foreign jurisdiction might impose
or change withholding taxes, possible seizure, nationalization or expropriation
of the foreign issuer, and the possible adoption of restrictions and exchange
controls. Certain costs attributable to foreign investing, such as custody
charges, are higher than those attributable to domestic investing.
12
<PAGE>
Smaller Companies
The Fund may invest in securities of all types of issuers, large or small, whose
earnings are believed by the Adviser to be in a relatively strong growth trend
or whose assets are substantially undervalued. Smaller companies often have
limited product lines, markets or financial resources, or may depend on a
limited management group. The securities of such companies may trade less
frequently and in limited volume, and only in the over-the-counter market or on
a regional securities exchange. As a result, these securities may fluctuate in
value more than those of larger, more established companies.
Emerging Markets
The risks of investing in foreign markets generally may be intensified in the
case of investments in emerging markets or countries with limited or developing
capital markets. Investing in securities of issuers in the Greater Asia Region
involves special risks. The Fund's investment focus in that region makes the
Fund particularly subject to political, social, or economic conditions
experienced in that region. Many of the countries in the Greater Asia Region
constitute "developing" or "emerging" economies and markets. Risks of investing
in such markets include: (i) less social, political, and economic stability;
(ii) smaller securities markets and lower trading volume, which may result in a
lack of liquidity and in greater price volatility; (iii) certain national
policies that may restrict the Fund's investment opportunities, including
restrictions on investments in issuers or industries deemed sensitive to
national interests, or expropriation or confiscation of assets or property,
which could result in a Fund's loss of its entire investment in that market; and
(iv) less developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
The economies of many of the countries in which the Fund may invest may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rates of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, and balance of payments positions.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures negotiated or imposed by the countries
with which they trade.
The securities markets in the Greater Asia Region (with the exception of Japan)
are substantially smaller, less liquid and more volatile than the major
securities markets in the United States. A high proportion of the shares of many
issuers may be held by a limited number of persons and financial institutions. A
limited number of issuers may represent a disproportionately large percentage of
market capitalization and trading value and the securities markets are
susceptible to being influenced by large investors trading significant blocks of
securities.
Risk Factors on Derivative Instruments
Options and Futures Transactions
The use of futures and related options involves certain special risks. Futures
and options transactions involve costs and may result in losses. Certain risks
arise because of the possibility of imperfect correlations between movements in
the prices of index futures and options and movements in the prices of the
underlying stock index or of the securities in the Fund's portfolio that are the
subject of a hedge. Similarly, there may be imperfect correlations between
movements in the prices of foreign currency futures contracts and options and
movements in the prices of the underlying currency. The successful use of
options and futures further depends on the Adviser's ability to forecast market
movements correctly. Other risks arise from the Fund's potential inability to
close out its futures or options positions, and there can be no assurance that a
liquid secondary market will exist for any future or option at any particular
time. The Fund generally expects that its options and futures transactions will
be conducted on recognized exchanges. In certain instances, however, the Fund
may purchase and sell options in the over-the-counter markets. The Fund's
ability to terminate options in the over-the-counter markets may be more limited
than for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to the Fund. See "Hedging and Derivatives" in the Statement of
Additional Information for a more detailed description.
Forward Foreign Currency Contracts, Currency Options and Currency Futures
Contracts
In order to hedge against possible changes in the exchange rates of foreign
currencies in relation to the U.S. dollar, the Fund may enter into forward
currency exchange contracts and use options on foreign currencies, but only for
the purpose of hedging. Forward foreign currency contracts involve obligations
to purchase or sell a specified currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. The Fund may enter into forward
contracts to sell foreign currency provided that no more than 15% of the Fund's
total assets would be required to purchase offsetting contracts. There is the
risk that movements in the price of the hedging instrument will not correlate
perfectly with movements in the price of the currency being hedged.
<PAGE>
Currency Factors
In the event that the Fund invests a significant portion of its assets in
foreign securities directly, the Fund's investment performance could be
significantly affected by changes in foreign currency exchange rates. The value
of the Fund's assets denominated in foreign currencies would increase or
decrease in response to fluctuations in the value of these foreign currencies
relative to the U.S. dollar. Currency exchange rates can be volatile at times in
response to supply
13
<PAGE>
and demand in the currency exchange markets, international balances of payments,
governmental intervention, speculation and other political and economic
conditions.
MANAGEMENT OF THE FUND
The Board of Trustees
The Trust has a Board of Trustees that establishes the Fund's policies and
supervises and reviews the management of the Fund. The day-to-day operations of
the Fund are administered by the officers of the Trust and by the Adviser
pursuant to the terms of the Investment Advisory Agreement with the Fund. The
Trustees review the various services provided by the Adviser to ensure that the
Fund's general investment policies and programs are being properly carried out
and that administrative services are being provided to the Fund in a
satisfactory manner. Information pertaining to the Trustees and executive
officers is set forth in the Statement of Additional Information.
The Investment Adviser
Sage/Tso Investment Management L.P. serves as the Fund's investment adviser and
manager, and is an investment adviser registered as such under the Investment
Advisers Act of 1940, as amended. The Adviser is a successor to Strategic
Investment Advisors, an SEC registered investment advisory firm owned solely by
James C. Tso. Since 1992, Mr. Tso has provided investment advisory services to
individuals and institutional clients and currently manages $10 million in
assets. Mr. Tso serves as President and Chief Investment Officer of the Fund.
The principal business address of the Adviser is 7799 Leesburg Pike, Suite 900,
Falls Church, Virginia 22043.
As the Fund's investment adviser, the Adviser makes the investment decisions
concerning the assets of the Fund and continuously reviews, supervises and
administers the Fund's investment programs, subject to the supervision of, and
policies established by the Trustees of the Fund.
For providing investment advisory services, the Fund pays the Adviser a monthly
fee which is calculated daily by applying an annual rate of 2.00% of the average
daily net assets of the Fund. The investment advisory fee is higher than that
paid by most investment companies, although the Adviser believes the fee to be
comparable to that paid by investment companies with similar investment
objectives and policies. From time to time, the Adviser may voluntarily waive
all or a portion of its management fee and/or absorb certain expenses of the
Fund without further notification of the commencement or termination of any such
waiver or absorption. Any such waiver or absorption will have the effect of
lowering the overall expense ratio of the Fund and increasing the Fund's overall
return to investors at the time any such amounts are waived and/or absorbed.
The- Adviser has voluntarily agreed to waive all or a portion of its fee, and/or
to reimburse expenses of the Fund to the extent necessary in order to limit net
operating expenses for the first year of operations to an annual rate of not
more than 2.75% of the Fund's average daily net assets. The Adviser reserves the
right to terminate its voluntary fee waiver and reimbursement at any time, in
its sole discretion. Any reductions in its fee that are made by the Adviser are
subject to reimbursement by the Fund within the following three years, provided
that the Fund is able to effect such reimbursement and remain in compliance with
applicable expense limitations. Any such management fee reimbursement will be
accounted for on the financial statements of the Fund as a contingent liability
of the Fund and it will appear as a footnote to the Fund's financial statements
until such time as it appears that the Fund will be able to effect such
reimbursement. At such time as it appears probable that the Fund is able to
effect such reimbursement, the amount of reimbursement that the Fund is able to
effect will be accrued as an expense of the Fund for that current period.
Portfolio Management
James C. Tso is primarily responsible for the day-to-day management of the
Fund's investment portfolio. Since 1992 Mr. Tso has managed investment
portfolios for clients and developed model portfolios consistent with the
investment objectives of the Fund. Mr. Tso's thirty years of experience includes
mergers and acquisitions and international banking and marketing investments. In
addition, Mr. Tso has provided financial and estate planning to clients. He has
a B.A. in Finance from New York University, an M.A. from Occidental College, and
a J.D. from George Mason University. Since 1975, Mr. Tso has held leadership
positions with various local and national Asian American organizations.
Marcel Theroz serves as chief portfolio strategist for the Fund. Mr. Theroz's
experience in investments spans more than 40 years. Previously, Mr. Theroz
served as Vice President and Chief Technical Analyst of Voss & Co., Inc., a
regional stock brokerage firm. Mr. Theroz also served as the firm's Director of
International Operations. Mr. Theroz received his MBA in economics from the
University of Lausanne, Switzerland and is an active member of the Society of
Market Technicials of Washington.
The Underwriter and Distributor
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken,
Pennsylvania 19428, was engaged pursuant to an agreement for the limited purpose
of acting as underwriter to facilitate the registration of shares of the
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<PAGE>
Fund under state securities laws and to assist in the sale of shares.
The Administrator
Fund/Plan Services, Inc. ("Fund/Plan"), which has its principal business address
at 2 W. Elm Street, Conshohocken, Pennsylvania 19428, serves as administrator of
the Fund pursuant to an Administrative Services Agreement. The services that
Fund/Plan provides to the Fund include: coordinating and monitoring of any third
parties furnishing services to the Fund; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions for the
Fund; preparing, filing and distributing proxy materials, periodic reports to
shareholders, registration statements and other documents; and responding to
shareholder inquiries.
The Custodian, Transfer Agent and Fund Accounting/Pricing Agent
The Bank of New York, 48 Wall Street, New York, New York 10286 is custodian for
the securities and cash of the Fund.
Fund/Plan serves as the Fund's transfer agent. As a transfer agent, it maintains
the records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of the Fund's shares,
acts as dividend and distribution disbursing agent and performs other
shareholder service functions. Shareholder inquiries should be addressed to the
transfer agent at (800) ________.
Fund/Plan also performs certain accounting and pricing services for the Fund,
including the daily calculation of the Fund's net asset value per share.
Fund Expenses
Each class of shares of the Fund will bear, pro rata, all of the common expenses
of the Fund. Such expenses may include, but are not limited to: management fees;
legal expenses; audit fees; printing costs (e.g. costs of printing annual
reports, semi-annual reports and prospectuses which are distributed to existing
shareholders); brokerage commissions; the expenses of registering and qualifying
shares of the Fund for sale with the Securities and Exchange Commission and with
various state securities commissions; expenses of the organization of the Fund;
transfer agent, custodian and administrator fees; the expenses of obtaining
quotations of portfolio securities and pricing the Fund's shares; trade
association dues; all costs associated with shareholder meetings and the
preparation and dissemination of proxy materials; costs of liability insurance
and fidelity bonds; fees for Trustees who are not officers, directors or
employees of the Adviser; and any extraordinary and nonrecurring expenses which
are not expressly assumed by the Adviser. Due to the specific distribution
expenses and other costs that will be allocable to each class, the net asset
value of and dividends paid to each class of the Fund will vary.
THE DISTRIBUTION PLANS
The Board of Trustees of the Fund has adopted separate distribution plans for
each class of shares pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Distribution Plans", or each a "Plan"). As provided in
each Plan, each class of shares will pay an annual fee up to 0.35% of the
respective classes' average daily net assets to Fund/Plan Broker Services, Inc.
("FPBS"), the Fund's distributor, as compensation for its services. From this
amount, FPBS may make payments to financial institutions and intermediaries such
as banks, savings and loan associations, insurance companies, investment
counselors, and broker-dealers who assist in the distribution of the respective
class of shares of the Fund or provide services with respect to both classes of
shares of the Fund, pursuant to service agreements with the Fund. In addition,
payments will be made to the Fund's Adviser. Each Plan is characterized as a
compensation plan because the distribution fee will be paid to FPBS as
distributor without regard to the distribution or shareholder service expenses
incurred by FPBS or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Distribution Plans, in
accordance with its terms and within NASD rules concerning sales charges.
The Fund may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through FPBS for which the affiliate or FPBS may
receive "usual and customary" compensation. The Adviser will use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions of the Fund. However, subject to policies
established by the Board of Trustees, the Fund may pay a broker-dealer a
commission for effecting a portfolio transaction for the Fund in excess of the
amount of commission another broker-dealer would have charged
15
<PAGE>
if the Adviser determines in good faith that the commission paid was reasonable
in relation to the brokerage or research services provided by such
broker-dealer. In selecting and monitoring broker-dealers and negotiating
commissions, consideration will be given to a broker-dealer's reliability, the
quality of its execution services on a continuing basis and its financial
condition.
The fees paid to FPBS under the Distribution Plans are subject to the review and
approval by the Trust's unaffiliated trustees who may reduce the fees or
terminate the Distribution Plans at any time. All such payments made pursuant to
the Distribution Plans shall be made for the purpose of selling shares issued by
each respective class of shares. The distribution fee of one class will not be
used to subsidize the sale of the other class of shares.
HOW TO PURCHASE SHARES
General
- -------
The Fund offers two classes of shares to the general public on a continuous
basis through the Fund's distributor, Fund/Plan Broker Services, Inc. ("FPBS"),
either by mail or by telephone. Class A Shares are sold with an initial sales
charge; Class D Shares are sold without an initial sales charge. Both classes of
shares are subject to annual distribution expenses pursuant to Rule 12b-1. See
"The Distribution Plans". Shares of the Fund are offered only to residents of
states in which the shares are eligible for purchase.
Purchase orders for shares of the Fund that are received by Fund/Plan in proper
form by the close of regular trading on the New York Stock Exchange
("NYSE")(currently 4:00 p.m. Eastern time), on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined public offering price.
Orders for Fund shares received after 4:00 p.m. Eastern time will be purchased
at the public offering price determined on the following business day. When
market conditions are extremely busy, it is possible that investors may
experience difficulties placing orders by telephone, and investors may wish to
place orders by mail.
The Fund reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund. The Fund reserves the right to vary the initial
investment minimum and minimums for additional investments at any time. In
addition, the Adviser may waive the minimum initial investment requirement for
any investor.
Shareholders may purchase Class A Shares and Class D Shares of the Fund in one
of the ways explained below.
Purchases By Mail
Both classes of the Fund may be purchased initially by completing the
application accompanying this Prospectus and mailing it to the transfer agent,
together with a check payable to "America Asia Allocation Growth Fund". The
check or money order and application should be mailed to Fund/Plan Services,
Inc, 2 W. Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428-0874. If
this is an initial purchase for Class A Shares, please send a minimum of $5,000
(or $2,000 for IRA and SEP accounts). If this is an initial purchase for Class D
Shares, please send a minimum of $10,000 (or $2,000 for IRA and SEP accounts).
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check payable to "America Asia Allocation Growth Fund", c/o
Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797.
Please enclose the stub of your account statement, and indicate the amount of
the investment.
Purchases By Wire Transfer
Before making an initial investment by wire, an investor must first telephone
the transfer agent at (800)________ or (610)________ in order to be assigned an
account number. The investor's name, account number, taxpayer identification
number or Social Security number and address must be specified in the wire. In
addition, an account application should be promptly forwarded to: Fund/Plan
Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, Pennsylvania
19428-0874. Shareholders having an account with a commercial bank that is a
member of the Federal Reserve System may purchase shares of the Fund by
requesting their bank to transmit funds by wire to:
United Missouri Bank KC NA
ABA #10-10-00695
16
<PAGE>
For: Fund/Plan Services, Inc.
A/C 98-7037-071-9
FBO "America Asia Allocation Growth Fund"
Shareholder Name and Account Number
Additional investments may be made at any time through the wire procedures
described above, which must include a shareholder's name and account number. The
shareholder's bank may impose a fee for investments by wire. The Fund will not
be responsible for the consequence of delays, including delays in the banking or
Federal Reserve wire systems.
Purchases Through Broker-Dealers
The Fund may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Fund. It is the
responsibility of such brokers, financial institutions or service organizations
to promptly forward purchase orders and payments for the same to the Fund.
Shares of the Fund purchased through brokers, financial institutions, service
organizations, banks and bank trust departments, may charge the shareholder a
transaction fee or other fee for its services at the time of purchase.
Wire orders for shares of the Fund received by dealers prior to 4:00 p.m.
Eastern time, and received by Fund/Plan before 5:00 p.m. Eastern time on the
same day, are confirmed at that day's public offering price. Orders received by
dealers after 4:00 p.m. Eastern time are confirmed at the public offering price
on the following business day. It is the dealer's obligation to place the order
with Fund/Plan before 5:00 p.m. Eastern time.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by mail, bank
wire, automatic investing or direct deposit. The minimum for subsequent
investments for Class A Shares is $200 for all accounts. The minimum for
subsequent investments for Class D Shares is $200 for all accounts. When making
additional investments by mail, simply return the remittance portion of a
previous confirmation with your investment in the envelope that is provided with
each confirmation statement. Your check should be made payable to "America Asia
Allocation Growth Fund" and mailed to Fund/Plan Services, Inc., P.O. Box 412797,
Kansas City, Missouri 64141-2797. Orders to purchase shares are effective on the
day Fund/Plan receives your check or money order.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the United States. A charge
(minimum of $20) will be imposed if any check used for the purchase of shares is
returned. The Fund and Fund/Plan each reserve the right to reject any purchase
order in whole or in part.
PURCHASE OF CLASS D SHARES
Class D Shares of the Fund may be purchased by registered investment advisers on
behalf of their clients at the net asset value next determined after receipt of
a purchase order in proper form by the transfer agent. Shares may also be bought
and sold through any securities dealer having a dealer agreement with FPBS, the
Fund's principal underwriter.
The minimum initial investment for Class D Shares is $10,000 ($2,000 for IRA and
SEP accounts) and subsequent purchases must be at least $200.
PURCHASE OF CLASS A SHARES
Class A Shares of the Fund are offered at the public offering price which is the
current net asset value per share next determined after receipt of a purchase
order in proper form by the transfer agent, plus any applicable sales charge.
The sales charge is a variable percentage of the offering price, depending upon
the amount of the sale. No sales charge will be assessed on the reinvestment of
distributions. See "Reduced Sales Charges". Shares may also be bought and sold
through any securities dealer having a dealer agreement with FPBS, the Fund's
principal underwriter.
The minimum initial investment for Class A Shares is $5,000 ($2,000 for IRA and
SEP accounts) and subsequent purchases must be at least $200.
17
<PAGE>
The following table shows the regular sales charge on Class A Shares of the Fund
together with the reallowance paid to dealers and the agency commission paid to
brokers, collectively the "commission":
<TABLE>
<CAPTION>
Sales Charge as Reallowance and Bro-
Sales Charge as Percentage kerage Commission
Percentage of of Net Amount as Percentage of
Class A Shares Amount of Purchase Offering Price Invested Offering Price
- --------------------------------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Less than $100,000............................... 5.00% 5.25% 4.75%
$ 100,000 or more but less than $200,000........ 4.50% 5.24% 4.25%
$ 200,000 or more but less than $300,000........ 4.00% 4.17% 3.85%
$ 300,000 or more but less than $500,000........ 3.50% 3.63% 3.35%
$ 500,000 or more but less than $1,000,000...... 2.50% 2.56% 2.40%
$1,000,000 and over.............................. 1.50% 1.52% 1.45%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor or a
sub-distributor may use its own funds to compensate financial institutions and
intermediaries in amounts that are in addition to the commissions shown above.
The Distributor or a sub-distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of cash or other
compensation, to certain financial institutions and intermediaries whose
registered representatives have sold or are expected to sell significant amounts
of shares of the Fund. Such other compensation may take the form of payments for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives to places within or outside of the United
States. Under certain circumstances, commissions up to the amount of the entire
sales charge may be reallowed to certain financial institutions and
intermediaries, who might then be deemed to be "underwriters" under the
Securities Act of 1933, as amended.
Reduced Sales Charges
The sales charge for purchases of Class A Shares of the Fund may be reduced
through Rights of Accumulation or Letter of Intent. To qualify for a reduced
sales charge, an investor must so notify his or her distributor at the time of
each purchase of shares which qualifies for the reduction.
Rights of Accumulation
A shareholder may qualify for a reduced sales charge by aggregating the net
asset values of shares requiring the payment of an initial sales charge,
previously purchased and currently owned, with the dollar amount of shares to be
purchased.
Letter of Intent
An investor of Class A Shares may qualify for a reduced sales charge immediately
by signing a non-binding Letter of Intent stating the investor's intention to
invest during the next 13 months a specified amount which, if made at one time,
would qualify for a reduced sales charge. The first investment cannot be made
more than 90 days prior to the date of the Letter of Intent. Any redemptions
made during the 13-month period will be subtracted from the amount of purchases
in determining whether the Letter of Intent has been completed. During the term
of the Letter of Intent, the transfer agent will hold shares representing 5.00%
of the indicated amount in escrow for payment of a higher sales load if the full
amount indicated in the Letter of Intent is not purchased. The escrowed shares
will be released when the full amount indicated has been purchased. If the full
amount indicated is not purchased within the 13-month period, a shareholder's
escrowed shares will be redeemed in an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of sales charge the
shareholder would have had to pay on his or her aggregate purchases if the total
of such purchases had been made at a single time. It is the shareholder's
responsibility to notify the transfer agent at the time the Letter of Intent is
submitted that there are prior purchases that may apply.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts of their minor children, or (iii) a fiduciary purchasing for
any
18
<PAGE>
one trust, estate or fiduciary account, including employee benefit plans created
under Sections 401 and 457 of the Internal Revenue Code of 1986, as amended,
including related plans of the same employer.
HOW TO REDEEM SHARES
Shareholders of both classes of shares may redeem their shares of the Fund
without being subject to a sales charge on any business day that the NYSE is
open for business. Redemptions will be effective at the current net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request for
redemption to Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874,
Conshohocken, Pennsylvania 19428-0874.
A written request must be in good order which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed and (iii) be signed by each registered
owner exactly as the shares are registered. To prevent fraudulent redemptions, a
signature guarantee for the signature of each person in whose name an account is
registered is required for all written redemption requests exceeding $10,000. A
signature guarantee is also required when a redemption request of any amount is
sent to an address other than the address of record. A guarantee may be obtained
from any commercial bank, credit union, member firm of a national securities
exchange, registered securities association, clearing agency and savings and
loan association. A credit union must be authorized to issue signature
guarantees; notary public endorsement will not be accepted. Signature guarantees
will be accepted from any eligible guarantor institution that participates in a
signature guarantee program. The transfer agent may require additional
supporting documents for redemptions made by corporations, executors,
administrators, trustees or guardians and retirement plans.
Redemption By Telephone
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by calling the transfer agent at
(800)________ or (610)_________ during normal business hours. In order to
arrange for redemption by wire or telephone after an account has been opened, or
to change the bank or account designated to receive redemption proceeds, a
written request with a signature guarantee must be sent to the transfer agent at
the address listed above, under the caption "Redemption By Mail".
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time.
During periods of unusual economic or market changes, telephone redemptions may
be difficult to implement. In such event, shareholders should follow the
procedures for redemption by mail.
19
<PAGE>
General Redemption Information
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. If you have any
questions with respect to the proper form for redemption requests you should
contact the transfer agent at (800) ______ or (610) _________.
Redemptions will be processed only on a business day during which the NYSE is
open for business. Redemptions will be effective at the current net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described above. The Fund normally
sends redemption proceeds on the next business day, but, in any event,
redemption proceeds are sent within seven calendar days of receipt of a
redemption request in proper form. Payment may also be made by wire directly to
any bank previously designated by an investor on his or her new account
application. There is a $9.00 charge for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at higher rates. It
should also be noted that banks may impose a fee for wire services. In addition,
there may be fees for redemptions made through brokers, financial institutions
and service organizations.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day on which the Fund calculates its net asset value are effective as
of that day. Redemption requests received after the close of the NYSE will be
effected at the net asset value per share determined on the next business day
following receipt. No redemption will be processed until the transfer agent has
received a completed application with respect to the account.
The Fund will satisfy redemption requests for cash to the fullest extent
feasible, as long as such payments would not, in the opinion of the Board of
Trustees, result in the necessity of the Fund to sell assets under
disadvantageous conditions or to the detriment of the remaining shareholders of
the Fund.
Pursuant to the Fund's Trust Instrument, however, payment for shares redeemed
may also be made in kind, or partly in cash and partly in-kind. The Fund has
elected, pursuant to Rule 18f-1 under the 1940 Act to redeem its shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund,
during any 90 day period for any one shareholder. Any portfolio securities paid
or distributed in-kind would be in readily marketable securities and valued in
the manner described below. See "Net Asset Value." In the event that an in-kind
distribution is made, a shareholder may incur additional expenses, such as
brokerage commissions, on the sale or other disposition of the securities
received from the Fund. In-kind payments need not constitute a cross-section of
the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the Securities and Exchange Commission has, by order, permitted
such suspension; (3) an emergency, as defined by rules of the Securities and
Exchange Commission, exists making disposal of portfolio investments or
determination of the value of the net assets of the Fund not reasonably
practicable.
Shares of the Fund may be redeemed through certain brokers, financial
institutions, service organizations, banks, and bank trust departments who may
charge the investor a transaction or other fee for their services at the time of
redemption. Such additional transaction fees would not otherwise be charged if
the shares were redeemed directly from the Fund.
Telephone Transactions
Shareholders who wish to initiate redemption transactions by telephone must
first elect the option, as described above. Neither the Fund nor any of its
service contractors will be liable for any loss or expense in acting upon
telephone instructions that are reasonably believed to be genuine. In this
regard, the Fund and its transfer agent require personal identification
information before accepting a telephone redemption. To the extent that the Fund
or its transfer agent fail to use reasonable procedures to verify the
genuineness of telephone instructions, the Fund may be liable for losses due to
fraudulent or unauthorized instructions. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Written confirmation
will be provided for all redemption transactions initiated by telephone.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntarily redeem
20
<PAGE>
shares in any account at its then current net asset value (which will be
promptly paid to the shareholder) if at any time the total investment does not
have a value of at least $500 as a result of redemptions, but not market
fluctuations. A shareholder will be notified that the value of his or her
account is less than the required minimum and such shareholder will be allowed
at least 60 days to bring the value of his or her account up to the minimum
before the redemption is processed.
SHAREHOLDER SERVICES
The following special services are available to shareholders of the Fund. There
are no charges for the programs noted below and a shareholder may change or stop
these plans at any time by written notice to the Fund.
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional monthly
purchases of shares of the Fund through an automatic investment plan. An
investor may authorize the automatic withdrawal of funds from his or her bank
account by opening his or her account with a minimum of $5,000 for Class A
Shares or $10,000 for Class D Shares, and completing the appropriate section on
the new account application enclosed with this Prospectus. Subsequent monthly
investments are subject to a minimum required amount of $100.
Retirement Plans
The Fund is available for investment by pension and profit sharing plans
including Individual Retirement Accounts, SEP, Keogh, 401(k) and 403(b) plans
through which an investor may purchase Fund shares. For details concerning any
of the retirement plans, please call the Fund at (800)_________or (610)
__________.
NET ASSET VALUE
The net asset value per share is calculated separately for each class of the
Fund and is computed once daily as of the close of regular trading on the NYSE,
currently 4:00 p.m. Eastern time. Currently, the NYSE is closed on the following
holidays or days on which the following holidays are observed: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.
The net asset value per share of each class is computed by dividing the net
assets attributable to a class of shares by the total number of outstanding
shares for that class. Expenses are accrued daily and applied when determining
the net asset value. The Fund's equity securities are valued based on market
quotations or, when no market quotations are available, at fair value as
determined in good faith by, or under direction, of the Board of Trustees.
Foreign securities are valued as of the close of trading on the primary exchange
on which they trade. The value is then converted to U.S. dollars using current
exchange rates. Securities listed on any national securities exchange are valued
at their last sale price on the exchange where the securities are principally
traded or, if there has been no sale on that date, at the mean between the last
reported bid and asked prices. Securities traded over-the-counter are priced at
the mean of the last bid and asked prices. Listed securities which are traded by
foreign investors in the Greater Asia Region in over-the-counter transactions
are valued at prices at which it is expected that such securities may be sold,
as determined in good faith by, or under the direction of, the Board of
Trustees.
Securities are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Trustees.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value. When
a security is valued at amortized cost, it is valued at its cost when purchased,
and thereafter by assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are valued at
their fair value as determined in good faith under procedures established by and
under the supervision of the Board of Trustees.
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<PAGE>
Foreign currency exchange rates and prices of securities traded on foreign
exchanges are generally determined prior to the close of trading on the NYSE.
Occasionally, events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of trading on the NYSE. Such events would not normally be reflected in a
calculation of the Fund's net asset value on that day. If events that materially
affect the value of the Fund's foreign investments or the foreign currency
exchange rates occur during such period, the investments will be valued at their
fair value as determined in good faith by, or under the direction of, the Board
of Trustees. Foreign securities held by the Fund may be traded on days and at
times when the NYSE is closed. Accordingly, the net asset value of the Fund may
be significantly affected on days when shareholders have no access to the Fund.
For valuation purposes, quotations of foreign portfolio securities, other assets
and liabilities and forward contracts stated in foreign currency are translated
into U.S. dollar equivalents at the prevailing market rates.
Net asset value is calculated separately for each class of the Fund based on
expenses applicable to the particular class. Although the methodology and
procedures for determining net asset value are identical for the Fund's classes,
the net asset value of the classes may differ because of the different fees and
expenses charged to each class.
DIVIDENDS AND TAXES
Dividends
The Fund will distribute its net investment income annually in December. Any net
gain realized from the sale of portfolio securities and net gains realized from
foreign currency transactions are distributed at least once each year unless
they are used to offset losses carried forward from prior years, in which case
no such gain will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at net asset
value, unless a shareholder elects to receive them in cash. Distribution options
may be changed at any time by requesting a change in writing.
Any check tendered in payment of dividends or other distributions which cannot
be delivered by the post office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then current
net asset value, and the dividend option may be changed from cash to reinvest.
Dividends are reinvested on the ex-dividend date (the "ex-date") at the net
asset value determined at the close of business on that date. Dividends and
distributions are treated the same for tax purposes whether received in cash or
reinvested in additional shares. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
Taxes
The Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Fund of any liability for federal
income tax to the extent that its earnings and net realized capital gains are
distributed to shareholders. To so qualify, the Fund will, among other things,
limit its investments so that, at the close of each quarter of its taxable year,
(i) not more than 25% of the market value of the Fund's total assets will be
invested in the securities of any single issuer and (ii) with respect to 50% of
the market value of its total assets, not more than 5% of the market value of
its total assets will be invested in the securities of any single issuer, and
the Fund will not own more than 10% of the outstanding voting securities of any
single issuer.
An investment in the Fund has certain tax consequences, depending on the type of
account. The Fund will distribute all of its net investment income to
shareholders. Distributions are subject to federal income tax and may also be
subject to state and local income taxes. Distributions are generally taxable
when they are paid, whether in cash or by reinvestment in additional shares,
except that distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December 31. If you
have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss) are
usually taxed as long-term capital gains, regardless of how long a shareholder
has held the Fund's shares. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareholder reinvests
22
<PAGE>
the distributions or elects to receive them in cash.
Shareholders may be subject to a 31 percent back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Fund, or if to the Fund's
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Information accompanying a
shareholder's statement will show the portion of those distributions that are
not taxable in certain states. Further information regarding the tax
consequences of investing in the Fund is included in the Statement of Additional
Information. The above discussion is intended for general information only.
Investors should consult their own tax advisers for more specific information on
the tax consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of each
calendar year in order to avoid liability for federal excise tax.
Dividends and interest received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that the Fund is liable for foreign income taxes so withheld, the Fund
intends to operate so as to meet the requirements of the Code to pass through to
the shareholders credit for foreign income taxes paid. Although the Fund intends
to meet Code requirements, in order to pass through credit for such taxes, there
can be no assurance that the Fund will be able to do so.
Sale, exchange or redemption of the Fund's shares is a taxable event to the
shareholder.
PERFORMANCE INFORMATION
Performance information such as total return for the Fund may be quoted in
advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
because the net investment return of the Fund changes in response to
fluctuations in market conditions, interest rates and Fund expenses, any given
performance quotation should not be considered representative of the Fund's
performance for any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. Total return and yield are calculated separately for
Class A Shares and Class D Shares.
The Fund's total return is the change in value of an investment in the Fund over
a particular period, assuming that all distributions have been reinvested. Thus,
total return reflects not only income earned, but also variations in share
prices at the beginning and end of the period. Average annual return reflects
the average percentage change per year in the value of an investment in the
Fund. Aggregate total return reflects the total percentage change over the
stated period. Please refer to the Statement of Additional Information for more
information on performance.
The performance of Class D Shares will normally be higher than for Class A
Shares after giving effect to the sales charge which may be applicable to Class
A Shares. Shareholders may obtain current performance information about the Fund
by calling (800)__________ or (610)__________.
GENERAL INFORMATION
Trustees and Officers of the Fund
The Trustees of the Fund have overall responsibility for the operation of the
Fund. The officers of the Fund who are employees or officers of the Adviser
serve without compensation from the Fund.
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<PAGE>
Description of Shares
The Trust is authorized to issue an unlimited number of shares of beneficial
interest with no par value. Shares of the Fund represent equal proportionate
interests in the assets of the Fund only, and have identical voting, dividend,
redemption, liquidation and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to subscribe
to any additional shares. Currently, there are two classes of shares issued by
the Fund. The validity of shares of beneficial interest offered by this
prospectus will be passed on by Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800. All accounts will be maintained in
book entry form and no share certificates will be issued.
Voting Rights
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held). All shares of the Fund participate equally
in regard to dividends, distributions, and liquidations with respect to the
Fund. Shareholders do not have preemptive, conversion or cumulative voting
rights.
Shareholder Meetings
The Trustees are not required, and do not intend, to hold annual meetings of
shareholders. The Trustees have undertaken to the SEC, however, that they will
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee when requested to do so by holders of not
less than 10% of the outstanding shares of the Fund. In addition, subject to
certain conditions, shareholders of the Fund may apply to the Fund to
communicate with other shareholders to request a shareholders' meeting to vote
upon the removal of a Trustee or Trustees.
Shareholder Reports and Inquiries
The Trust issues unaudited financial information semiannually and audited
financial statements annually. Shareholder inquiries should be addressed to the
Fund c/o Sage/Tso Investment Management L.P., 7799 Leesburg Pike, Suite 900,
Falls Church, Virginia 22043, (800)_________ or (703) 255-1233. Purchase and
redemption transactions should be made through the transfer agent by calling
(800) ________ or (610)_______.
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<PAGE>
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of permitted investments for the Fund, and the
associated risk factors:
ADRs and EDRs - For many foreign securities, there are United States dollar
denominated American Depositary Receipts ("ADRs"), which are bought and sold in
the Unites States and are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in the domestic bank or a
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of foreign issuers. By investing in ADRs rather than directly in
foreign issuer's stock however, the Fund will avoid currency risks during the
settlement period for either purchases or sales. In general, there is a large,
liquid market in the United States for most ADRs. ADRs may be available through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the security underlying the receipt and a depositary;
whereas, an unsponsored facility may be established by a depositary without
participation by the issuer of the underlying security. Holders of the
unsponsored depositary receipts generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through, to the holders of the receipts,
voting rights with respect to the deposited securities. The Fund may also invest
in European Depositary Receipts ("EDRs") which are receipts evidencing an
arrangement with a European bank similar to that for ADRs and are designed for
use in the European securities markets. EDRs are not necessarily denominated in
the currency of the underlying security.
Bankers' Acceptances - Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank or trust company. Bankers'
acceptances are used by manufacturers and exporters to finance the shipment and
storage of goods. Maturities are generally six months or less.
Certificates of Deposit - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
Commercial Paper - Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
Convertible Securities - Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
Fixed Income Securities - Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The market value of fixed
income investments will change in response to interest rate changes and other
factors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates. Changes by recognized agencies in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal will also affect the value of these
investments. Changes in the value of portfolio securities will not affect cash
income derived from these securities but will affect the Fund's net asset value.
Investment Companies
The Fund may invest in shares of other investment companies including foreign
investment companies. Some of the countries in which the Fund invests may not
permit direct investment. Investments in such countries may only be permitted
through foreign government approved or authorized investment vehicles, which may
include investment companies. Investing through such vehicles may involve
frequent or layered fees or expenses and may, as well, be subject to limitations
under the Investment Company Act of 1940 (the "1940 Act"). Under the 1940 Act,
the Fund may invest up to 10% of its assets in shares of investment companies
and up to 5% of its assets in any one investment
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<PAGE>
company as long as the investment does not represent more than 3% of the voting
stock of the acquired investment company.
Investment Grade Securities
Investment grade debt securities are those receiving one of the four highest
ratings from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group, or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed comparable by the Adviser to such
rated securities. Securities rated in the lowest category of investment grade
are considered to have speculative characteristics.
Forward Foreign Currency Contracts, Currency Options, and Currency Futures
Contracts
In order to hedge against possible changes in the exchange rates of foreign
currencies in relation to the U.S. dollar, the Fund may enter into forward
currency exchange contracts and use options on foreign currencies, but only for
the purpose of hedging. Forward foreign currency contracts involve obligations
to purchase or sell a specified currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. The Fund may enter into forward
contracts to sell foreign currency provided that no more than 15% of the Fund's
total assets would be required to purchase offsetting contracts.
Hedging
The Fund may engage in various portfolio strategies to reduce certain risks of
its investments and to attempt to enhance income. These strategies may, however,
prove ineffective, in enhancing income and fail to produce any income for the
Fund in certain instances. The Fund may invest up to 5% of its total assets,
taken at market value at the time of investment, in premiums on such hedging
strategies. These strategies currently include the use of options, forward
currency exchange contracts and futures contracts and options thereon. The
Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations and there can be no assurance that any
of these strategies will succeed.
IDRs
IDRs (International Depositary Receipts, also known as GDRs or Global Depositary
Receipts) are similar to ADRs except that they are bearer securities for
investors or traders outside the U.S., and for companies wishing to raise equity
capital in securities markets outside the U.S. Most IDRs have been used to
represent shares although it is possible to use them for bonds, commercial paper
and certificates of deposit. IDRs can be convertible to ADRs in New York making
them particularly useful for arbitrage between the markets. The Fund has no
current intention to invest in unsponsored IDRs.
Options and Futures
Although the Fund has no present intentions to engage in transactions involving
the use of options and futures contracts, the Fund may engage in such
transactions for purposes of increasing its investment return or hedging against
market changes. The Fund may buy and sell stock index futures contracts for
hedging purposes. An "index future" is a contract to buy or sell units of a
particular stock index at an agreed price on a specified future date. Depending
on the change in value of the index between the time when the Fund enters into
and terminates an index future transaction, the Fund realizes a gain or loss.
The Fund may buy and sell call and put options and index futures or on stock
indices in addition to or as an alternative to purchasing or selling index
futures or, to the extent permitted by applicable law, to earn additional
income. The Fund may seek to increase its current return by writing covered call
and put options on securities it owns or in which it may invest. The Fund
receives a premium for writing a call or put option, which increases the Fund's
return if the option expires unexercised or is closed out at a net profit. When
the Fund writes a call option, it gives up the opportunity to profit from any
increase in the price of a security above the exercise price of the option.
Repurchase Agreements
Repurchase agreements are agreements by which the Fund obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price on an agreed upon date within a number of days from the date of purchase.
The custodian will hold the security as collateral for the repurchase agreement.
The Fund bears a risk of loss in the event the other party defaults on its
obligations and the Fund is delayed or prevented from exercising its right to
dispose of the collateral, or if the Fund realizes a loss on the sale of the
collateral. The Fund will enter into repurchase agreements only with financial
institutions deemed to present minimal risk of bankruptcy during the term of the
agreement based on established guidelines. Repurchase agreements are considered
loans under the 1940 Act.
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<PAGE>
Restricted Securities - Restricted securities are securities that may not be
sold to the public without registration under the Securities Act of 1933, as
amended, absent an exemption from registration.
U.S. Government Securities - U.S. Government Securities include obligations
issued by agencies or instrumentalities of the U.S. Government including, among
others, Export Import Bank of the United States, Farmers Home Administration,
Federal Farm Credit System, Federal Housing Administration, Maritime
Administration, Small Business Administration, and The Tennessee Valley
Authority. Obligations of instrumentalities of the U.S. Government include
securities issued by, among others, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association and the U.S. Postal Service. Some of these
securities are supported by the full faith and credit of the U.S. Treasury
(e.g., Government National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank)
and still others are supported only by the credit of the instrumentality (e.g.,
Federal National Mortgage Association). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the obligation so that in the event of a default prior to maturity
there might not be a market and thus no means of realizing on the obligation
prior to maturity. Guarantees as to the timely payment principal and interest do
not extend to the value or yield of these securities nor to the value of the
Fund's shares.
Warrants - Warrants are instruments that give holders the right, but not the
obligation, to buy shares of a company at a given price during a specified
period.
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<PAGE>
INVESTMENT ADVISER
Sage/Tso Investment Management L.P.
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
(703) 255-1233
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)_________
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)_________
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP 1800
Massachusetts Avenue, N.W.
Washington, DC 20036-1800
AUDITORS
Price Waterhouse LLP
30 South Seventeenth Street
Philadelphia, Pennsylvania 19103
For Additional Information about America Asia Allocation Growth Fund call:
(800)_________
28
<PAGE>
AMERICA ASIA ALLOCATION GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
June __, 1996
- --------------------------------------------------------------------------------
This Statement of Additional Information dated June __, 1996 is not a prospectus
but should be read in conjunction with the Prospectus describing Class A Shares
and Class D Shares of the America Asia Allocation Growth Fund (the "Fund") dated
June __, 1996. The Prospectus may be amended or supplemented from time to time.
No investment in shares should be made without first reading the Prospectus.
This Statement of Additional Information is intended to provide additional
information regarding the activities and operations of the Fund, and should be
read in conjunction with the Prospectus. A copy of the Prospectus may be
obtained without charge from Sage/Tso Investment Management L.P. (the "Adviser")
at the addresses and telephone numbers below.
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Sage/Tso Investment Management L.P.
2 W. Elm Street 7799 Leesburg Pike, Suite 900
Conshohocken, Pennsylvania 19428 Falls Church, Virginia 22043
(610)________ (703) 255-1233
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information
or in the Prospectus in connection with the offering made by the
Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Trust or its distributor.
The Prospectus does not constitute an offering by the Trust
or by the distributor in any jurisdiction in which such offering may
not lawfully be made.
29
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TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
The Trust and the Fund...........................................................................................31
The Greater Asia Region..........................................................................................31
Investment Policies and Techniques...............................................................................31
American Depository Receipts..................................................................................31
Convertible Securities........................................................................................32
Foreign Securities............................................................................................32
Hedging and Derivatives.......................................................................................
Repurchase Agreements.........................................................................................32
Loans of Portfolio Securities.................................................................................32
Illiquid Securities...........................................................................................33
Rule 144A Securities..........................................................................................33
Other Investments.............................................................................................33
Investment Restrictions..........................................................................................33
Investment Advisory and Other Services
Investment Advisory Agreement.................................................................................35
Administrator.................................................................................................35
Underwriter...................................................................................................35
Distributor...................................................................................................36
Trustees and Officers............................................................................................36
Net Asset Value..................................................................................................37
Taxes............................................................................................................37
Federal Income Tax............................................................................................37
Foreign Taxes.................................................................................................38
Portfolio Transactions...........................................................................................38
Performance Information
In General....................................................................................................38
Total Return Calculation......................................................................................38
Yield Calculation.............................................................................................39
Performance and Advertisements ...............................................................................40
Other Information................................................................................................41
Shareholder Liability.........................................................................................41
Limitations on Trustees' Liability............................................................................41
</TABLE>
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THE TRUST AND THE FUND
This Statement of Additional Information relates to America Asia Allocation
Growth Fund (the "Fund"), a separate series of Sage/Tso Trust (the "Trust"), a
diversified, open-end management company established on February 9, 1996 under
Delaware law as a Delaware business trust. The Trust Instrument permits the
Trust to offer separate series of shares of beneficial interest. The Trust
currently is comprised of one series, which offers its shares through two
separate classes: Class A Shares and Class D Shares. To the extent that the
Trust is a newly formed entity, it has no prior history.
THE GREATER ASIA REGION
The Adviser believes that the rapidly growing economies in the Greater Asia
Region offer attractive opportunities for investment. The newly industrialized
nations of this region are in an earlier, more dynamic growth stage of their
development. The Adviser believes that the continued growth opportunities exist
due to structural changes taking place throughout the region. The relaxation of
trade barriers and the freer movement of capital are increasing the flow of
commerce within the region and fostering economic independence. As capital
investment increases, many of the Greater Asian Region countries are developing
more efficient capital markets for investment.
The following countries in the Greater Asia Region are designated as emerging or
less developed countries: India, The Philippines, Indonesia, Singapore,
Malaysia, Taiwan, Thailand and China. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of industrialization. In these countries, the Fund
effectively may invest through investment funds subject to the provisions of the
Investment Company Act of 1940 relating to the purchase of securities of
investment companies.
The Chinese, Hong Kong and Taiwanese stock markets are undergoing a period of
growth and change which may result in trading volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant law and regulations. In particular, the securities industry in China is
not well developed. China has no securities laws of nationwide applicability.
China governmental actions can have a significant effect on the economic
conditions in the Greater Asia Region, which could adversely affect the value
and liquidity of the Fund's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain of the other Greater Asia Region countries do not have
comprehensive systems of laws, although substantial changes have occurred in
China in this regard in recent years. The bankruptcy laws pertaining to state
enterprises have rarely been used and are untried in regard to an enterprise
with foreign shareholders. The uncertainties faced by foreign investors in China
are exacerbated by the fact that many laws, regulations and decrees of China are
not publicly available, but merely circulated internally. Similar risks exist in
other Greater Asia Region countries.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Prospectus for the
Fund regarding the permitted investments and risk factors and the investment
objective and policies of the Fund.
American Depository Receipts
The Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are denominated in U.S. dollars and are designed for
use in the U.S. securities markets. ADRs are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying securities. For
purposes of the Fund's investment policies, ADRs are deemed to have the same
classification as the underlying securities they represent. Thus, an ADR
representing ownership of common stock will be treated as common stock. ADR
facilities may be established as either "unsponsored" or "sponsored". While ADRs
issued under these two types of facilities are similar in some respects, there
are distinctions between them relating to the
31
<PAGE>
rights and obligations of ADR holders and the practices of market participants.
Convertible Securities
The Fund may invest in convertible securities. Common stock occupies the most
junior position in a company's capital structure. Convertible securities entitle
the holder to exchange such securities for a specified number of shares of
common stock, usually of the same company, at specified prices within a certain
period of time, and to receive interest or dividends until the holder elects to
convert. The provisions of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holder's claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of preferred stock and convertible preferred stock,
the holder's claims on assets and earnings are subordinated to the claims of all
creditors but are senior to the claims of common shareholders.
To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value, and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as is the case with a fixed-income security.
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. At such times, the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
HEDGING AND DERIVATIVES
Futures Transactions
Although the Fund may engage in futures transactions for the purchase or sale
for future delivery of securities, the Fund does not have the current intention
of doing so in the foreseeable future. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are generally
terminated by entering into offsetting transactions. The Fund may engage in
futures transactions on U.S. or foreign exchanges or boards of trade. In the
U.S., futures exchanges and trading are regulated under the Commodity Exchange
Act by the Commodity Futures Trading Commission (CFTC), a U.S. government
agency.
The Fund may enter into such futures contracts to protect against the adverse
effects of fluctuations in security prices, or interest rates, without actually
buying or selling the securities underlying the contract. A stock index futures
contract obligates the seller to deliver (and the purchaser to take) an amount
of cash equal to a specific dollar amount times the difference between the value
of a specific stock index at the close of the last trading day of the contract
and the price at which the agreement was made.
With respect to options on futures contracts, when the Fund is temporarily not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a partial hedge
against the declining price of the security or foreign currency which is
deliverable upon exercise of the futures contract. The writing of a put option
on a futures contract constitutes a partial hedge against the increasing price
of the security or foreign currency which is deliverable upon exercise of the
futures contract.
To the extent that market prices move in an unexpected direction, the Fund may
not achieve the anticipated benefits of futures contracts or options on futures
contracts or may realize a loss. Further, with respect to options on futures
contracts, the Fund may seek to close out an option position by writing or
buying an offsetting position covering the same securities or contracts and have
the same exercise price and expiration date. The ability to establish and close
out positions on options will be subject to the maintenance of a liquid
secondary market, which cannot be assured.
Restrictions on the Use of Futures Contracts
The Fund may enter into futures contracts provided that such obligations
represent no more than 15% of the Fund's net assets. Under the Commodity
Exchange Act, the Fund may enter into futures transactions for hedging purposes
without regard to the percentage of assets committed to initial margin and for
other than hedging purposes provided that assets committed to initial margin do
not exceed 5% of the Fund's net assets. To the extent required by law, the Fund
will set aside cash and appropriate liquid assets in a segregated account to
cover its obligations related to futures contracts.
Foreign Currency Hedging Strategies -- Special Considerations
Although the Fund may use options and futures on foreign currencies and forward
currency contracts to hedge against movements in the values of the foreign
currencies in which the Fund's securities are denominated, the Fund does not
currently intend to use such hedging strategies in the foreseeable future. Such
currency hedges can protect against price movements in a security the Fund owns
or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other causes.
The value of hedging instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such hedging instruments, the
Fund could be disadvantaged by having to deal in the odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
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The Fund might seek to hedge against changes in the value of a particular
currency when no hedging instruments on that currency are available or such
hedging instruments are more expensive than certain other hedging instruments.
In such cases, the Fund may hedge against price movements in that currency by
entering into transactions using hedging instruments on other currencies, the
values of which the Adviser believes will have a high degree of positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the hedging instrument will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
Forward Currency Contracts
A forward currency contract involves an obligation to purchase or sell a
specific currency at a specified future date, which may be any fixed number of
days from the contract date agreed upon by the parties, at a price set at the
time the contract is entered into.
The Fund may enter into forward currency contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or another foreign currency. The
Fund also may use forward currency contracts for "cross-hedging." Under this
strategy, the Fund would increase its exposure to foreign currencies that the
Adviser believes might rise in value relative to the U.S. dollar, or the Fund
would shift its exposure to foreign currency fluctuations from one country to
another.
As is the case with futures contracts, holders and writers of forward currency
contracts can enter into offsetting closing transactions, similar to closing
transactions on futures, by selling or purchasing, respectively, an instrument
identical to the instrument held or written. Secondary markets generally do not
exist for forward currency contracts, with the result that closing transactions
generally can be made for forward currency contracts only by negotiating
directly with the contra party. Thus, there can be no assurance that the Fund
will in fact be able to close out a forward currency contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the contra
party, the Fund might be unable to close out a forward currency contract at any
time prior to maturity. In either event, the Fund would continue to be subject
to market risk with respect to the position, and would continue to be required
to maintain a position in securities denominated in the foreign currency or to
maintain cash or securities in a segregated account.
The precise matching of forward currency contracts amounts and the value of the
securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
Limitations on the Use of Forward Currency Contracts
The Fund may enter into forward currency contracts or maintain a net exposure to
such contracts only if (1) the consummation of the contracts would not obligate
the Fund to deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency, or (2) the
Fund maintains cash, U.S. government securities or liquid, high-grade debt
securities in a segregated account in an amount not less than the value of its
total assets committed to the consummation of the contract and not covered as
provided in (1) above, as marked to market daily.
Options
The Fund may buy put and call options and write covered call and secured put
options but has no current intention of actively engaging in such transactions.
Such options may relate to particular securities, stock indices, or financial
instruments and may or may not be listed on a national securities exchange and
issued by the Options Clearing Corporation. Options trading is a highly
specialized activity which entails greater than ordinary investment risk.
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Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.
The Fund will write call options only if they are "covered." In the case of a
call option on a security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, liquid assets, such as cash, U.S. Government
securities or other liquid high grade debt obligations, in such amount held in a
segregated account by its custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if
the Fund maintains with its custodian a diversified stock portfolio, or liquid
assets equal to the contract value. A call option is also covered if the Fund
holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written; or (ii) greater than the exercise price of the call written
provided the difference is maintained by the Fund in liquid assets such as cash,
U.S. Government securities and other high-grade debt obligations in a segregated
account with its custodian. The Fund will write put options only if is "secured"
by liquid assets maintained in a segregated account by the Fund's custodian in
an amount not less than the exercise price of the option at all times during the
option period.
Purchasing Call Options
The Fund may purchase call options to the extent that premiums paid by the Fund
do not aggregate more than 10% of the Fund's total assets. When the Fund
purchases a call option, in return for a premium paid by the Fund to the writer
of the option, the Fund obtains the right to buy the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of the call option, who receives the premium upon writing the option,
has the obligation, upon exercise of the option, to deliver the underlying
security against payment of the exercise price. The advantage of purchasing call
options is that the Fund may alter portfolio characteristics and modify
portfolio maturities without incurring the cost associated with transactions.
The Fund may, following the purchase of a call option, liquidate its position by
effecting a closing sale transaction. This is accomplished by selling an option
of the same series as the option previously purchased. The Fund will realize a
profit from a closing sale transaction if the price received on the transaction
is more than the premium paid to purchase the original call option; the Fund
will realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.
Although the Fund will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an Exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an Exchange
may exist. In such event, it may not be possible to effect closing transactions
in particular options, with the result that the Fund would have to exercise its
options in order to realize any profit and would incur brokerage commissions
upon the exercise of such options and upon the subsequent disposition of the
underlying securities acquired through the exercise of such options. Further,
unless the price of the underlying security changes sufficiently, a call option
purchased by the Fund may expire without any value to the Fund, in which event
the Fund would realize a capital loss which will be short-term unless the option
was held for more than one year.
Covered Call Writing
Although the Fund may write covered call options from time to time on such
portions of its portfolio, the Fund does not have the current intention of doing
so in the foreseeable future. The Fund may write covered call options, without
limit, as the Adviser determines is appropriate in pursuing the Fund's
investment objective. The advantage to the Fund of writing covered calls is that
the Fund receives a premium which is additional income. However, if the security
rises in value, the Fund may not fully participate in the market appreciation.
The Fund's obligation under a covered call option is terminated upon the
expiration of the option or upon entering a closing purchase transaction. In a
closing purchase transaction, the Fund, as writer of an option, terminates its
obligation by purchasing an option of the same series as the option previously
written.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable the Fund to write
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another call option on the underlying security with either a different exercise
price or expiration date or both. The Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. A closing purchase transaction cannot be effected with respect
to an option once the option writer has received an exercise notice for such
option.
The Fund will write call options only on a covered basis, which means that the
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, the
Fund would be required to continue to hold a security which it might otherwise
wish to sell or deliver a security it would want to hold. The exercise price of
a call option may be below, equal to or above the current market value of the
underlying security at the time the option is written.
Purchasing Put Options
Although the Fund may invest up to 10% of its total assets in the purchase of
put options, the Fund does not have the current intention of doing so in the
foreseeable future. The Fund will, at all times during which it holds a put
option, own the security covered by such option. With regard to the writing of
put options, the Fund will limit the aggregate value of the obligations
underlying such put options to 20% of its total net assets. The purchase of the
put on substantially identical securities held will constitute a short sale for
tax purposes, the effect of which is to create short-term capital gain on the
sale of the security and to suspend running of its holding period (and treat it
as commencing on the date of the closing of the short sale) or that of a
security acquired to cover the same if at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by the Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. The Fund intends to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The Fund may sell a put option which it has
previously purchased prior to the sale of the securities underlying such option.
Such sale will result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold. The Fund may sell a put option
purchased on individual portfolio securities. Additionally, the Fund may enter
into closing sale transactions. A closing sale transaction is one in which the
Fund, when it is the holder of an outstanding option, liquidate its position by
selling an option of the same series as the option previously purchased.
Writing Put Options
Although the Fund may also write put options on a secured basis, the Fund does
not have the current intention of doing so in the foreseeable future. Writing
put options on a secured basis means that the Fund will maintain in a segregated
account with its custodian, cash or U.S. Government securities in an amount not
less than the exercise price of the option at all times during the option
period. The amount of cash or U.S. Government securities held in the segregated
account will be adjusted on a daily basis to reflect changes in the market value
of the securities covered by the put option written by the Fund. Secured put
options will generally be written in circumstances where the Adviser wishes to
purchase the underlying security for the Fund's portfolio at a price lower than
the current market price of the security.
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Foreign Securities
Investments in securities of foreign issuers may subject the Fund to investment
risks that differ in some respects from those related to investments in
obligations of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other income, possible seizure, nationalization or
expropriation of foreign deposits, the possible establishment of exchange
controls or taxation at the source, greater fluctuations in value due to changes
in currency exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also have higher custodial fees and
sales commission than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those regarding domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. In addition, foreign markets may be characterized by
lower liquidity, greater price volatility, less regulation and higher
transaction costs than U.S. markets.
Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement). Repurchase
agreements may be considered to be loans by the Fund under the Investment
Company Act of 1940, as amended (the "1940 Act").
The financial institutions with whom the Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Adviser. The Adviser will continue to monitor the creditworthiness of the seller
under a repurchase agreement, and will require the seller to maintain during the
term of the agreement the value of the securities subject to the agreement at
not less than the repurchase price. The Fund will only enter into a repurchase
agreement where the market value of the underlying security, including interest
accrued, will at all times be equal to or exceed the value of the repurchase
agreement.
The Fund may invest in repurchase agreements with foreign parties or a
repurchase agreement based on securities denominated in foreign currencies.
Legal structures in foreign countries, including bankruptcy laws, may offer less
protection to investors such as the Fund. Furthermore, foreign repurchase
agreements generally involve greater risks than repurchase agreements made in
the United States.
Loans of Portfolio Securities
The Fund may lend portfolio securities to broker-dealers and financial
institutions provided that (1) the loan is secured continuously by collateral
marked-to-market daily, and maintained in an amount at least equal to the
current market
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value of the securities loaned; (2) the Fund may call the loan at any time and
receive the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities and (4) the aggregate market value of
securities loaned by the Fund will not at any time exceed 33% of the total
assets of the Fund.
Collateral will consist of U.S. government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Fund will only enter into portfolio loans
after a review by the Adviser, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will be
monitored on an ongoing basis.
Illiquid Securities
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines reviewed by
the Board of Trustees. The Adviser will monitor the liquidity of securities held
by the Fund, and report periodically on such determinations to the Board of
Trustees.
Rule 144A Securities
The Fund may invest in securities that are exempt from the registration
requirements of the Securities Act of 1933 pursuant to Securities Exchange
Commission ("SEC") Rule 144A. Those securities, purchased pursuant to Rule 144A,
are traded among qualified institutional buyers, and are subject to the Fund's
limitation on illiquid investment.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The Fund
will limit its investments in securities of issuers which the Fund is restricted
from selling to the public without registration under the Securities Act of 1933
to no more than 10% of the Fund's net assets, excluding restricted securities
eligible for resale pursuant to Rule 144A that have been determined to be liquid
by the Fund's Board of Trustees.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize the Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the Fund's investment objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental restrictions and may
not be changed without the approval of a majority of the outstanding voting
shares (as defined in the 1940 Act) of the Fund. Unless otherwise indicated, all
percentage limitations listed below apply only at the time of the transaction.
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which results from a
relative change in values or from a change in the Fund's total assets will not
be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE AND POLICIES" and "DESCRIPTION
OF PERMITTED INVESTMENTS AND RISK FACTORS" in the Prospectus, the Fund may not:
1. purchase securities of any one issuer if, as a result,
more than 5% of the Fund's total assets would be
invested in securities of that issuer or the Fund would
own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to
this limitation, and except that this limit does not
apply to securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities or to
securities issued by other investment companies;
2. purchase any security if, as a result of that purchase,
25% or more of the Fund's total assets would be
invested in securities of issuers having their
principal business activities in the same industry,
except that this limitation does not apply to
securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities;
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3 issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of
331/3 of the Fund's total assets (including the amount
of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the
time of the issuance or borrowing, except that the Fund
may borrow up to an additional 5% of its total assets
(not including the amount borrowed) for temporary or
emergency purposes. The Fund will not purchase
securities when borrowings exceed 5% of its total
assets;
4. make loans, except through loans of securities or
through repurchase agreements, provided that, for
purposes of this restriction, the acquisition of bonds,
debentures, other debt securities or instruments, or
participations or other interest therein and
investments in government obligations, commercial
paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making
of a loan;
5. engage in the business of underwriting the securities
of others, except to the extent that the Fund might be
considered an underwriter under the Federal securities
laws in connection with its disposition of securities;
6. purchase or sell real estate, except that investments
in securities of issuers that invest in real estate or
other instruments supported by interests in real estate
are not subject to this limitation, and except that the
Fund may exercise rights under agreements relating to
such securities, including the right to enforce
security interests to hold real estate acquired by
reason of such enforcement until that real estate can
be liquidated in an orderly manner; or
7. purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments,
but the Fund may purchase, sell or enter into financial
options and futures, forward and spot currency
contracts.
The following investment limitations are not fundamental and may be changed
without shareholder approval:
(i) The Fund does not currently intend to engage in short
sales of securities or maintain a short position,
except that the Fund may (a) sell short ("against the
box") and (b) maintain short positions in connection
with its use of financial options and futures, forward
and spot currency contracts or swap transactions.
(ii) The Fund does not currently intend to purchase
securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and
except that the Fund may make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts or swap
transactions.
(iii) The Fund does not currently intend to purchase
securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations
thereunder.
(iv) The Fund does not currently intend to invest in
companies for the purpose of exercising control or
management.
(v) The Fund does not currently intend to invest in oil,
gas or mineral exploration or development programs or
leases, except that investment in securities of issuers
that invest in such programs or leases and investments
in asset-backed securities supported by receivables
generated by such programs or leases are not subject to
this prohibition.
(vi) The Fund does not currently intend to invest more than
5% of its net assets in warrants, including within that
amount no more than 2% in warrants which are not listed
on the New York or American Stock Exchanges, except
warrants acquired as a result of its holdings of common
stocks.
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(vii) The Fund does not currently intend to purchase or
retain the securities of any issuer if, to the
knowledge of the Fund, any officer or director of the
Fund or of its investment manager owns beneficially
more than 1/2 of 1% of the outstanding securities of
such issuer, and such officers and directors of the
Fund or of its investment manager who own more than 1/2
of 1%, own in the aggregate more than 5% of the
outstanding securities of such issuer.
(viii) The Fund does not currently intend to invest more than
10% of its total assets in securities of companies less
than three years old. Such three-year period shall
include the operation of any predecessor company or
companies. To comply with certain state securities
restrictions, the Fund will not invest more than 5% of
its total assets in securities of such issuers;
however, if these restrictions are loosened, the Fund
reserves the right to invest up to 10% of its total
assets in securities of such issuers without advance
notice to shareholders.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Adviser have entered into an investment advisory agreement (the
"Investment Advisory Agreement"). The Investment Advisory Agreement provides
that the Adviser shall not be protected against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Investment Advisory Agreement provides that if, for any fiscal year, any
ratio of expenses of the Fund (including amounts payable to the Adviser but
excluding interest, taxes, brokerage, litigation and other extraordinary
expenses) exceeds limitations established by any state in which the shares of
the Fund are registered, the Adviser will bear the amount of such excess.
If the Fund is registered in California, and to the extent that the Fund
purchases securities of open-end investment companies, the Adviser will waive
its advisory fee on that portion of the Fund's assets invested in such
securities.
The continuance of the Investment Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees
or by a vote of the shareholders of Fund, and (ii) by the vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement
will terminate automatically in the event of its assignment, and is terminable
at any time without penalty by the Trustees of the Fund, or by a majority of the
outstanding shares of the Fund on not less than 30 days' nor more than 60 days'
written notice to the Adviser, or by the Adviser on 90 days' written notice to
the Fund.
Administrator
Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, Pennsylvania 19428 (the
"Administrator") provides certain administrative services to the Fund pursuant
to an Administrative Services Agreement.
Under the Administrative Services Agreement, the Administrator: (1) coordinates
with the Custodian and Transfer Agent and monitors the services they provide to
the Fund; (2) coordinates with and monitors any other third parties furnishing
services to the Fund; (3) provides the Fund with necessary office space,
telephones and other communications facilities and personnel competent to
perform administrative and clerical functions; (4) supervises the maintenance by
third parties of such books and records of the Fund as may be required by
applicable federal or state law; (5) prepares and, after approval by the Fund,
files and arranges for the distribution of proxy materials and periodic reports
to shareholders of the Fund as required by applicable law; (6) prepares and,
after approval by the Fund, arranges for the filing of such registration
statements and other documents with the SEC and other federal and state
regulatory authorities as may be required by applicable law; (7) reviews and
submits to the officers of the Fund for their approval invoices or other
requests for payment of the Fund's expenses and instructs the Custodian to issue
checks in payment thereof, and (8) takes such other action with respect to the
Fund as may be necessary in the opinion of the Administrator to perform its
duties under the agreement.
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Pursuant to this Administrative Services Agreement, Fund/Plan receives a fee
computed at the annual rate of 0.15% of the first $50 million of total average
net assets, 0.10% of the next $50 million of total average net assets and 0.05%
of total net assets in excess of $100 million. Pursuant to the Administrative
Services Agreement, aggregate administration fees shall not be less than $67,000
for both Class A Shares and Class D Shares of the Fund.
Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken,
Pennsylvania 19428-0874, has been engaged pursuant to an agreement for the
limited purpose of acting as underwriter to facilitate the registration of
shares of the Fund under state securities laws and to assist in the sale of
shares.
Distributor
Fund/Plan Broker Services, Inc. ("FPBS") also serves as the distributor pursuant
to a Distribution Agreement (the "Distribution Agreement") which applies to
Class A and Class D shares of the Fund.
Class A Shares and Class D Shares of the Fund are subject to separate
distribution plans (the "Distribution Plans") pursuant to Rule 12b-1 under the
1940 Act. As provided in the Distribution Plan for Class A Shares, the Fund will
pay an annual fee of 0.35% of the Fund's average daily net assets attributable
to Class A Shares, to FPBS as compensation for its services. As provided in the
Distribution Plan for Class D Shares, the Fund will pay an annual fee of 0.35%
of the Fund's average daily net assets attributable to Class D Shares, to FPBS
as compensation for its services. From this amount, FPBS may make payments to
financial institutions and intermediaries such as banks, savings and loan
associations, insurance companies, investment counselors and broker-dealers as
compensation for services, reimbursement of expenses incurred in connection with
distribution assistance or provision of shareholder services. The Distribution
Plans are characterized as compensation plans because the distribution fee will
be paid to FPBS as distributor without regard to the distribution or shareholder
service expenses incurred by FPBS or the amount of payments made to financial
institutions and intermediaries. The Fund intends to operate the Distribution
Plans in accordance with their terms and within the rules of the National
Association of Securities Dealers, Inc. concerning sales charges. Pursuant to
such rules, the Distributor is required to limit aggregate initial sales charges
and asset-based sales charges to 6.25% of total gross sales of each class of
shares.
The Distribution Plans will continue in effect from year to year, provided that
each such continuance is approved at least annually by a vote of the Board of
Trustees, including a majority vote of the Rule 12b-1 trustees, cast in person
at a meeting called for the purpose of voting on such continuance. The
Distribution Plans may be terminated at any time, without penalty, by vote of a
majority of the Rule 12b-1 trustees or by vote of the holders of a majority of
the outstanding shares of the applicable class on not more than 60 days', nor
less than 30 days' written notice to any other party to the Plans. The Plans may
not be amended to increase materially the amounts to be spent for the services
described herein without approval by the shareholders of the applicable class,
and all material amendments are required to be approved by the Board of
Trustees. Each Plan will automatically terminate in the event of its assignment.
Pursuant to each Plan, the Board of Trustees will review at least quarterly a
written report of the distribution expenses incurred on behalf of each class of
shares of the Fund. The report will include an itemization of the distribution
expenses and the purpose of such expenditures.
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and executive officers of the Fund is set
forth below.
James C. Tso (49), Chairman of the Board and President, 7799 Leesburg Pike,
Suite 900, Falls Church, Virginia 22043. Mr. Tso is an investment advisor who
began his career in the international commercial banking department of a major
New York bank. Mr. Tso later headed a small investment firm's pension advisory
department. In 1977, Mr. Tso received a National Urban Fellowship, came to the
Capital area, and worked for the U.S. Congress. Since 1981, he has consulted
independently to Capital area firms on strategic planning and implementation
focused on mergers,
40
===============================================================================
venture capital and corporate finance. A graduate of Leadership Washington
(1989), Mr. Tso has served on many county commissions and has received three
gubernatorial appointments, including (1) Virginia International Trade
Commission; (2) Virginia Small Business Financing Authority, and (3) the Board
of Visitors of George Mason University. Mr. Tso received a B.A. in finance and
economics from New York University's School of Commerce (1970), an M.A. in Urban
Economics from Occidental College (1978) and a Juris Doctor from George Mason
University School of Law (1984).
William L. Fang (45), Trustee, Secretary and Treasurer, 6838 Camus Place,
Springfield, Virginia 22152. Mr. Fang is the Deputy General Counsel of the
Edison Electric Institute ("EEI") and the assistant issue manager for EEI's
Global Climate Change Issue team. Mr. Fang's primary responsibilities at EEI are
in regulatory, industry and legislative affairs. He has worked on numerous
amicus curiae briefs for the U.S. Supreme Court and U.S. Courts of Appeals and
has written comments for informal rule makings before several federal agencies.
Mr. Fang's area of expertise include rate making and industry structure as well
as energy and environmental issues. Before joining EEI in 1992, Mr. Fang served
as an attorney with the U.S. Department of Energy and with the U.S. Postal
Service. Mr. Fang received a B.S. degree in journalism from Northwestern
University and a Juris Doctor degree from the University of Virginia.
Dr. Stuart S. Malawer, (52) Trustee, 6533 Sunny Hill Court, McLean, Virginia
22101. Dr. Malawer is Distinguished Service Professor of Law & International
Trade and Director of the Center for International Trade Policy at George Mason
University. Dr. Malawer founded the International Transactions Graduate Program
at George Mason University's International Institute and directed that program
from 1990 to 1995. Dr. Malawer has also taught at the Wharton School, University
of Pennsylvania; Harvard Law School (International Tax Program); University of
Baltimore Law School; and the New England School of Law. Dr. Malawer has served
several times as a Virginia gubernatorial appointee concerned with international
trade. He has consulted to a number of firms, government departments, and other
institutions in the area of international trade and foreign trade law and has
written many publications related to law and international trade.
Dr. John N. Paden (59), Trustee, 9009 Ellenwood Lane, Fairfax, Virginia 22032.
Dr. Paden is a Clarence J. Robinson Professor of International Studies at George
Mason University. Dr. Paden received his B.A. in philosophy from Occidental
College, was a Rhodes Scholar at Oxford University in philosophy, politics and
economics, and received his Ph.D. in Government from Harvard University. Before
coming to George Mason University, he was professor of Political Science and
Norman Dwight Harris Professor of International Studies at Northwestern
University. Author or co-author of many books including Religion and Political
Culture in Kano, which received the Herskovits prize, he was the first Dean of
the Faculty of Social and Management Sciences at Bayero University in Kano,
Nigeria. Dr. Paden has served on the executive committee of a U.S.-China
scholarly exchange program since 1984 and has traveled extensively in China. He
has presented Congressional testimony and participated in numerous think tanks.
He was instrumental in establishing the graduate program in International
Transactions at George Mason University and teaches that program's foundation
course in "Culture and International Transactions." At present, he is involved
in establishing a Center for Asia Pacific Economic Cooperation at George Mason
University.
Patricia A. Shelton (45), Trustee, 11790 Great Owl Circle, Reston, Virginia
22094. Ms. Shelton is President of PRAMM Consulting Group, Inc., a research,
management consulting and marketing firm located in Vienna, Virginia. Ms.
Shelton has a ten-year track record specializing in market research, program
development and association management, conceptual design and analysis,
innovative problem solving and collaborative team building. Her professional
experience includes work as a marketing consultant to small businesses. A
graduate of the Leadership Washington Program, Ms. Shelton is the author of
"Marketing Workbook for Small and Minority Businesses." Ms. Shelton has a B.S.
in psychology and an M.A. from Rutgers University in Public Administration and
Management.
41
===============================================================================
NET ASSET VALUE
The net asset value per share is calculated separately for Class A Shares and
Class D Shares of the Fund. The net asset value per share is computed by
dividing the net assets attributable to a class of shares by the total number of
outstanding shares for that class.
Each class of the Fund will bear, pro-rata, all of the common expenses of the
Fund. The net asset value of all outstanding shares of each class will be
computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
the class. All income earned and expenses incurred by the Fund will be borne on
a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of such shares of such classes.
Portfolio securities are valued and net asset value per share is determined as
of the close of regular trading on the New York Stock Exchange ("NYSE") which
currently is 4:00 p.m. (Eastern Time), on each day the NYSE is open for trading.
The NYSE is open for trading every day except Saturdays, Sundays and the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
The calculation of the Fund's net asset values may not take place
contemporaneously with the determination of the prices of portfolio securities
held by the Fund. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of the NYSE will not
be reflected in the Fund's calculation of net asset value unless the Board of
Trustees deems that the particular event would materially affect the net asset
value, in which case an adjustment will be made. Assets or liabilities initially
expressed in terms of foreign currencies are translated prior to the next
determination of the net asset value of the Fund's shares into U.S. dollars at
the prevailing market rates. The fair value of all other assets is added to the
value of securities to arrive at the total assets.
TAXES
The following is only a summary of certain federal tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus, and is not intended as a substitute for careful tax planning.
Shareholders are urged to consult their tax advisors with specific reference to
their own tax situations, including their state and local tax liabilities.
Non-U.S. investors should consult their tax advisors concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on the date of this Statement
of Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
The Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, the Fund
expects to eliminate or reduce to a nominal amount the federal income taxes to
which it may be subject. In order to qualify for treatment as a RIC under the
Code, the Fund generally must distribute annually to its shareholders at least
90% of its investment company taxable income (generally, net investment income
plus net short-term capital gain) (the "Distribution Requirement") and also must
meet several additional requirements. Among these requirements are the
following: (i) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock or securities, or certain
other income; (ii) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of stocks or securities held for
less than three months; (iii) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RlCs and other
securities, with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of the Fund's assets and that
does not represent more than 10% of the outstanding voting securities of such
issuer and (iv) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RlCs) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades or businesses.
42
===============================================================================
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Fund will be subject to a nondeductible 4% federal excise tax to the extent that
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short- and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts. The Fund intends to make sufficient distributions of its ordinary
income and capital gain net income prior to the end of each calendar year to
avoid liability for federal excise tax.
Any gain or loss recognized on a sale, redemption or exchange of shares of the
Fund by a non-exempt shareholder who is not a dealer in securities generally
will be treated as a long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise generally will be treated as a
short-term capital gain or loss. If shares of the Fund on which a net capital
gain distribution has been received are subsequently sold, redeemed or exchanged
and such shares have been held for six months or less, any loss recognized will
be treated as a long-term capital loss to the extent of the long-term capital
gain distribution.
In certain cases, the Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service or (3) has not certified to
the Fund that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be subject
to tax on its taxable income at regular corporate rates. In such an event, all
distributions from the Fund generally would be eligible for the corporate
dividend received deduction for corporate shareholders.
Foreign Taxes
Foreign governments may withhold taxes from dividends or interest paid with
respect to foreign securities typically at a rate between 10% and 35%. Tax
conversions between certain countries and the United States may reduce or
eliminate such taxes. The Fund intends to elect to pass-through foreign taxes
paid in order for a shareholder to take a credit or deduction if, at the close
of its fiscal year, more than 50% of the Fund's total assets are invested in
securities of foreign issuers.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any broker/dealer or group of
broker/dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees, the Adviser is responsible for placing
the orders to execute transactions for the Fund. In placing orders, it is the
policy of the Fund to seek to obtain the best net results taking into account
such factors as price (including the applicable dealer spread), the size, type
and difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Adviser generally seeks reasonably competitive spreads, the
Fund will not necessarily be paying the lowest spread available.
It is not the Fund's practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through brokers or dealers.
However, the Adviser may place portfolio orders with qualified broker/dealers
who recommend the Fund to clients, and may, when a number of brokers and dealers
can provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker/dealers.
PERFORMANCE INFORMATION
In General
From time to time, the Fund may include general comparative information, such as
statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Fund may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
43
===============================================================================
performance examples will be based on an express set of assumptions and are not
indicative of the performance of the Fund.
From time to time, the yield and total return of the Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Performance information will be calculated for Class A Shares and Class D Shares
of the Fund and will vary due to the effect of expense ratios on the performance
calculations.
Total Return Calculation
The Fund computes average annual total return by determining the average annual
compounded rate of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
n
ERV = P (1 + T)
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ ERV - 1 ]
---
P
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Yield Calculation
Yield, in its simplest form, is the ratio of income per share derived from the
Fund's investments to a current maximum offering price expressed in terms of a
percentage. The yield is quoted on the basis of earnings after expenses have
been deducted. The yield of the Fund is calculated by dividing the net
investment income per share
44
===============================================================================
earned during a 30-day (or one month) period by the maximum offering price per
share on the last day of the period and annualizing the result. The Fund's net
investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
6
YIELD = 2 [ ( a - b + 1) - 1 ]
------
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by the
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by the Fund is calculated by computing the
yield to maturity of each obligation held by the Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by the Fund. For purposes of this calculation,
it is assumed that each month contains 30 days. The date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. With
respect to debt obligations purchased at a discount or premium, the formula
generally calls for amortization of the discount or premium. The amortization
schedule will be adjusted monthly to reflect changes in the market values of
such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by the Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
Performance and Advertisements
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Fund's
performance may also be compared to the average performance of its Lipper
category.
The Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. ("Morningstar") which ranks funds on the basis of
historical risk and total return. Morningstar's rankings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or necessarily
predictive of future performance.
The Fund may compare its performance to a wide variety of indices including the
Japan, East Asia and Standard & Poor's 500 Indices.
45
===============================================================================
In assessing such comparisons of yield, return or volatility, an investor should
keep in mind that the composition of the investments in the reported indices and
averages is not identical to those of the Fund, that the averages are generally
unmanaged, and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its figures.
Because certain of the Fund's investments are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Fund's investment performance. Historical information
regarding the value of the dollar versus foreign currencies may be used from
time to time in advertisements concerning the Fund.
OTHER INFORMATION
Shareholder Liability
The Trust is an entity of the type commonly known as a "Delaware business
trust". Under Delaware law, shareholders of such a trust could, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. Even if, however, the Fund were held to be a partnership, the possibility
of the shareholders incurring financial loss for that reason appears remote
because the Trust Instrument contains an express disclaimer of shareholder
liability for obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by or on behalf of the Trust or the Trustees, and because the Trust
Instrument provides for indemnification out of the Trust property for any
shareholder held personally liable for the obligations of the Trust.
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only for his own
willful defaults and, if reasonable care has been exercised in the selection of
officers, agents, employees or investment advisers, shall not be liable for any
neglect or wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with actual or threatened litigation in which
they may be involved because of their offices with the Trust unless it is
determined in the manner provided in the Trust Instrument that they have not
acted in good faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Trust Instrument shall protect
or indemnify a Trustee against any liability for his willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties.
Legal Counsel
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
Washington, DC 20036-5891, counsel to the Fund, has passed upon the legality of
the shares offered by the Prospectus.
Independent Auditors
Price Waterhouse LLP, 30 South 17th Street, Philadelphia, PA 19103, serves as
independent auditors for the Trust.
46
===============================================================================
SAGE/TSO TRUST
FORM N-1A
PART C -- OTHER INFORMATION
Part C. Other Information
Item 24. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements.
Included in Part A: None.
Included in Part B:
(1) Independent Auditors Report relating to Statement of Assets and
Liabilities at June 20, 1996.
(2) Statement of Assets and Liabilities and related notes as of
June 20, 1996.
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument is incorporated by reference to Exhibit
No. (1) of Registrant's Registration Statement No.
33-01973 filed March 26, 1996.
(2) By-Laws are incorporated by reference to Exhibit No. (2)
of Registrant's Registration Statement No. 33-01973
filed March 26, 1996.
(3) Voting Trust Agreement -- None.
(4) All Instruments Defining the Rights of Holders -- None.
(5) Investment Advisory Contracts -- Investment Advisory Agreement
between Sage/Tso Trust and Sage/Tso Investment Management L.P.
filed herewith electronically.
(6) Underwriting Agreement -- Underwriting Agreement between
Sage/Tso Trust, Sage/Tso Investment Management L.P. and
Fund/Plan Broker Services, Inc. filed herewith electronically.
(7) Bonus, Profit Sharing, Pension or Other Similar
Contracts -- None.
(8) Custodian Agreements --
(a) Custody Agreement between The Bank of New York and Sage/Tso
Trust filed herewith electronically.
(b) Custody Administration Agreement between Sage/Tso Trust and
Fund/Plan Services filed herewith electronically.
(9) (a) Transfer Agent Services Agreement -- Transfer Agent
Services Agreement between Sage/Tso Trust and Fund/Plan
Services. Inc. filed herewith electronically.
(b) Administration Agreement -- Administration Agreement between
Sage/Tso Trust and Fund/Plan Services, Inc. filed herewith
electronically.
(c) Accounting Services Agreement -- Accounting Services Agreement
between Sage/Tso Trust and Fund/Plan Services, Inc. filed
herewith electronically.
(10)(a) Opinion and Consent of Kirkpatrick & Lockhart LLP
regarding the legality of the securities being issued --
filed herewith electronically.
(11)Consent of Independent Auditors -- filed herewith
electronically.
(12)Financial Statements Omitted from Item 23 -- None.
(13)Agreements or Understandings Made in Consideration for
Providing the Initial Capital -- filed herewith electronically.
(14)Model Plan -- None.
(15)(a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares -- filed herewith electronically.
47
===============================================================================
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class D Shares -- filed herewith
electronically.
(16)Schedule for Computation of Performance Quotations --
None.
(17)Financial Data Schedule -- None.
(18)Multiple Class Plan pursuant to Rule 18f-3 -- filed herewith
electronically.
(19)Trustees' Powers of Attorney -- filed herewith electronically.
(a) James C. Tso
(b) William L. Fang
(c) Dr. Stuart E. Malawer
(d) Dr. John N. Paden
(e) Patrica A. Shelton
Item 25. Persons Controlled by or Under Common Control with Registrant.
---------------------------------------------------------------
None.
Item 26. Number of Holders of Securities.
--------------------------------
None.
Item 27. Indemnification.
----------------
Reference is made to Article X of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to
the Trust's Trust Instrument, its By-Laws or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy
as expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by trustees, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or controlling
persons in connection with shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser.
-----------------------------------------------------
Sage/Tso Investment Management L.P., 7799 Leesburg Pike, Falls
Church, Virginia 22043 provides investment advisory services to
individual and institutional investors, and as of December 31, 1995
had approximately $10 million in assets under management.
For information as to any other business, vocation or employment of
a substantial nature in which each Trustee or officer of the
Registrant's investment adviser has been engaged for his own account
or in the capacity of Trustee, officer, employee, partner or
trustee, reference is made to Form ADV (File #801- 40902) filed by
it under the Investment Advisers Act of 1940.
Item 29. Principal Underwriter.
----------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal
underwriter for the Registrant's securities, currently acts as
principal underwriter for the following entities:
The Brinson Funds, Inc.
Chicago Trust Funds
Fairport Funds
48
===============================================================================
First Mutual Funds
Focus Trust, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
The Japan Alpha Fund
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
(b) The table below sets forth certain information as to the
Underwriter's Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
------------------ ----------------- -----------
<S> <C> <C>
Kenneth J. Kempf Director and President None
2 W. Elm Street
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and None
2 W. Elm Street Principal
Conshohocken, PA 19428-0874
Rocco C. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874 and Principal
Joseph M. O'Donnell, Esq. Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
</TABLE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
49
<PAGE>
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
All records described in Section 31(a) of the 1940 Act and the Rules
17 CFR 270.31a-1 to 31a-3 promulgated thereunder, are maintained by
the Trust's Investment Adviser, Sage/Tso Investment Management L.P.,
7799 Leesburg Pike, Suite 900, Falls Church, Virginia 22043, except
for those maintained by the Fund's Custodian, The Bank of New York,
277 Park Avenue, New York, New York 10172 and the Trust's
Administrator, Transfer Agent and Fund Accounting Services Agent,
Fund/Plan Services Inc., 2 W. Elm Street, Conshohocken, PA 19428.
Item 31. Management Services.
--------------------
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings.
-------------
(a) Registrant hereby undertakes to file a post-effective
amendment within four to six months from the effective date of
this Registration Statement under the Securities Act of 1933.
Registrant understands that such post-effective amendment will
contain reasonably current financial statements which need not
be certified by independent public accountants.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to Shareholders upon request and without charge.
(c) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any director or directors when requested in writing
to do so by the record holders of not less than 10 percent of
the Registrant's outstanding shares and to assist its
shareholders in accordance with the requirements of Section
16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
50
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Statement of Assets and Liabilities
June 20, 1996
<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Trustees
Sage/Tso Trust
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of America Asia
Allocation Growth Fund (constituting Sage/Tso Trust, hereafter referred to as
the "Trust") at June 20, 1996 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Trust's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA
June 25, 1996
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Statement of Assets and Liabilities
June 20, 1996
- --------------------------------------------------------------------------------
Assets
Cash $100,000
Deferred ogranization costs 68,000
Deferred offering costs 17,000
--------
185,000
Liabilities
Due to adviser 85,000
Net assets $100,000
========
Net assets consist of:
Portfolio shares of Class D (unlimited
authorization - no par value) 20,000 outstanding
shares of beneficial interest
Net asset value, offering and redemption price, Class D $ 5.00
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Statement of Assets and Liabilities
June 20, 1996
- --------------------------------------------------------------------------------
1. Organization
The Trust is organized as a Delaware Business Trust under a Declaration of
Trust dated February 9, 1996. The Trust is registered under the Investment
Company Act of 1940, as an open-end investment company with one fund,
America Asia Allocation Growth Fund (the "Fund"). The Declaration of Trust
permits the Trust to offer separate classes of shares in each fund, Class A
Shares and Class D Shares. The Fund has not commenced operations except
those related to organizational materials and the sale of initial shares of
beneficial interest to Sage/Tso Investment Management L.P.
2. Investment Advisory, Management, Distribution and Shareholder Servicing
Agreements
The trust has entered into the following service agreements:
Under the Investment Advisory Agreement with the Trust, Sage/Tso Investment
Management L.P. ("Adviser") will act as the investment adviser to the Fund.
For its investment advisory services to the Trust, the Adviser will be
entitled to a fee, which is calculated daily and paid monthly, at an annual
rate of 2.00% of the Fund's average daily net assets.
Under the Administration Agreement with the Trust, Fund/Plan Services, Inc.
("Fund/Plan") will provide the Trust with overall management services. The
Trust agrees to pay Fund/Plan each month an asset based fee calculated at
the annual rate of .15% on the first $50 million of average net assets of
the Trust; .10% on the next $50 million and .05% for those assets greater
than $100 million, subject to a minimum annual fee of $55,000 for the
initial class of shares and $12,000 for each additional class.
Fund/Plan Broker Services, Inc. ("FPBS") will serve as the Fund's
underwriter/distributor pursuant to Underwriting Agreement (the
"Underwriting Agreement") with the Trust. The Trustees of the Trust have
adopted a separate Distribution Plan for both the Trust's Class A and Class
D shares pursuant to RUle 12b-1 under the 1940 Act. As provided in each
plan, each class of shares will pay an annual fee up to .35% of the
respective classes average daily net assets as compensation to FPBS. The
Fund intends to operate the Distribution Plans in accordance with its terms
and within NASD rules concerning sales charges. In addition, purchases of
Class A shares are subject to a maximum sales charge of 5.00%.
Fund/Plan has also been engaged as the transfer agent and fund accounting
service provider for the Trust under the "Transfer Agent Services
Agreement" and "Accounting Services Agreement", respectively.
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Notes to Financial Statements
June 20, 1996
- --------------------------------------------------------------------------------
3. Organizational Costs, Offering Costs and Transactions with Affiliates
Organizational costs have been capitalized by the Fund and are being
amortized over 60 months commencing with operations. In the event any of
the initial shares are redeemed by any holder thereof during the period
that the Fund is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Fund will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at
the time of the redemption.
Offering costs have been capitalized by the Fund and will be amortized over
twelve months commencing with operations.
Certain officers and/or trustees of the Trust are also officers of the
Adviser. The Trust pays each unaffiliated Trustee an annual fee for
attendance of quarterly, interim and committee meetings. Compensation of
officers and affiliated Trustees of the Trust is paid by the Adviser.
<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Trustees
Sage/Tso Trust
In our opinion, the accoompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of America Asia
Allocation Growth Fund (constituting Sage/Tso Trust, hereafter referred in as
the "Trust") at June 20, 1996 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Trust's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonble assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty south Seventeenth Street
Philadelphia, PA
June 25, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Falls Church, and State of Virginia on the 26th day of June , 1996.
Sage/Tso Trust
--------------------------
Registrant
By /s/ James C. Tso
--------------------------
James C. Tso
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Sage/Tso Trust has been signed below by the following persons in
the capacities and on the date indicated.
Signature Capacity Date
- ---------- -------- ----
/s/ James C. Tso
- ----------------------- President, Trustee and Principal 6/26/96
James C. Tso Executive Officer
/s/ William L. Fang
- ----------------------- Trustee, Secretary, Treasurer, 6/26/96
William L. Fang and Principal Officer
/s/ Stuart E. Malawer Trustee 6/26/96
- -----------------------
Stuart E. Malawer
/s/ John N. Paden Trustee 6/26/96
- -----------------------
John N. Paden
/s/ Patricia A. Shelton Trustee 6/26/96
- -----------------------
Patricia A. Shelton
/s/ Joseph M. O'Donnell
- -----------------------
By: Joseph M. O'Donnell, as
Attorney-in-Fact and Agent
pursuant to Power of Attorney
51
<PAGE>
EXHIBIT INDEX
-------------
99.5 Investment Advisory Contract
99.6 Underwriting Agreement
99.8a Custody Agreement (The Bank of New York)
99.8b Custody Administration Agreement (Fund/Plan Services)
99.9a Transfer Agent Services Agreement
99.9b Administration Agreement
99.9c Accounting Services Agreement
99.10 Opinion and Consent of Kirkpatrick & Lockhart
99.11 Report and Consent of Price Waterhouse LLP
99.12 Financial Statements
99.13 Initial Capital Agreement
99.15a Plan of Distribution - Class A Shares
99.15b Plan of Distribution - Class D Shares
99.18 Multiple Class Plan
99.19 Powers of Attorney
EXHIBIT 99.5
Page 1 of 4 pages.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of ______________, 1996 by and between
Sage/Tso Trust (the "Trust"), a Delaware business trust and Sage/Tso Investment
Management L.P., a limited partnership (the "Adviser").
1. Duties of Adviser. The Trust hereby appoints the Adviser to act as
investment adviser to America Asia Allocation Growth Fund (the "Fund") for the
period and on such terms set forth in this Agreement. The Trust employs the
Adviser to manage the investment and reinvestment of the assets of the Fund, to
determine in its discretion the assets to be held uninvested, to provide the
Trust with records concerning the Adviser's activities which the Trust is
required to maintain, and to render regular reports to the Trust's officers and
Board of Trustees concerning the Adviser's discharge of the foregoing
responsibilities. The Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Adviser accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein.
2. Portfolio Transactions. The Adviser shall provide the Fund with a
trading department. The Adviser shall select the brokers or dealers that will
execute the purchases and sales of securities for the Fund, and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Fund are obtained. The Fund will
bear all expenses associated with its investment activities, including, without
limitation, brokerage commissions and custody expenses. Subject to policies
established by the Board of Trustees of the Trust and communicated to the
Adviser, it is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Fund, or be in breach of any obligation owing to the Trust or in respect of
the Fund under this Agreement, or otherwise, solely by reason of its having
caused the Fund to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for the Fund in excess of the
amount of commission that another member of an exchange, broker or dealer would
have charged, if the Adviser determines in good faith that the commission paid
was reasonable in relation to the
Page 2 of 4 pages.
<PAGE>
brokerage or research services provided by such member, broker or dealer, viewed
in terms of that particular transaction or the Adviser's overall
responsibilities with respect to the accounts, including the Fund, as to which
it exercises investment discretion. The Adviser will promptly communicate to the
officers and Trustees of the Trust such information relating to Fund
transactions as they may reasonably request.
3. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 1 and 2 of this Agreement, the Fund shall pay to
the Adviser within five business days after the end of each calendar month, a
monthly fee of one twelfth of 2.00% of the Fund's average daily net assets for
the month. The net asset value shall be calculated in the manner provided in the
Fund's Prospectus and Statement of Additional Information then in effect. In the
event of termination of this Agreement, the fee provided in this Section 3 shall
be paid on a pro rata basis, based on the number of days when this Agreement was
in effect.
4. Reports. The Fund and the Adviser agree to furnish to each other
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Adviser. The services of the Adviser to the Fund are not
to be deemed exclusive, and the Adviser shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby.
6. Liability of Adviser. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Adviser of its obligations
and duties hereunder, the Adviser shall not be subject to any liability
whatsoever to the Fund, or to any shareholder of the Fund, for any error of
judgement, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Fund.
7. Duration and Termination. This Agreement shall become effective on
__________________ 1996, provided that first it is approved by the Board of
Trustees of the Trust, including a majority of those trustees who are not
parties to this Agreement or interested persons of any party hereto, in the
manner provided in section 15(c) of the Investment Company Act of 1940, as
amended (the "Act"), and by the holders of a majority of
Page 3 of 4 pages.
<PAGE>
the outstanding voting securities of the Fund; and shall continue in effect
until ________________ 1998. Thereafter, this Agreement may continue in effect
only if such continuance is approved at least annually by: (i) the Trust's Board
of Trustees or, (ii) by the vote of a majority of the outstanding voting
securities of the Fund; and in either event by a vote of a majority of those
trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in section 15(c) of the Act.
This Agreement may be terminated by the Trust, at any time, without the payment
of any penalty, by the Board of Trustees of the Trust or by vote of the holders
of a majority of the outstanding voting securities of the Fund on 60 days'
written notice to the Adviser. This Agreement may be terminated by the Adviser
at any time, without the payment of any penalty, upon not more than 60 days'
written notice to the Trust. This Agreement will automatically terminate in the
event of its assignment. Any notice under this Agreement shall be given in
writing, addressed and delivered or mailed postpaid, to the other party at the
principal office of such party.
As used in this Section 7, the terms "assignment", "interested
person", and "a vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and
Section 2(a)(42) of the Act and Rule 18f-2 thereunder.
8. Name of Adviser. The parties agree that the Adviser has a
proprietary interest in the name "Sage/Tso Trust", and the Trust agrees to
promptly take such action as may be necessary to delete from its name and/or the
name of the Trust any reference to the name of the Adviser promptly after
receipt from the Adviser of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10.Governing Law. This agreement shall be governed by and construed and
interpreted in accordance with the laws of the Commonwealth of Virginia.
11.Records. All records held by the Adviser which are required to be
maintained and preserved by the Fund in order to comply with Rules 31 a-1 and 31
a-2 of the Act remain the property of the Fund and will be surrendered promptly
by the Adviser upon the request of the Fund.
Page 4 of 4 pages.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this day of , 1996.
----------- -------------
ATTEST: SAGE/TSO TRUST
/s/ William L. Fang /s/ James C. Tso
- -------------------------- ----------------------
William L. Fang, Secretary James C. Tso, President
ATTEST: SAGE/TSO INVESTMENT MANAGEMENT L.P.
/s/ James C. Tso
- -------------------------- ------------------------------
James C. Tso, Managing Partner
Page 5 of 4 pages.
<PAGE>
EXHIBIT 99.6
================================================================================
Underwriting Agreement between Sage/Tso Trust and Fund/Plan Services, Inc.
Page 1 of 10 pages.
<PAGE>
UNDERWRITING AGREEMENT
This Agreement, dated as of the day of , 1996, made by and between
Sage/Tso Trust, a Delaware business trust (the "Trust") operating as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"); Sage/Tso Investment Management L.P. ("Sage/Tso"),
a registered investment adviser existing as a limited partnership duly organized
and existing under the laws of the Commonwealth of Virginia; and Fund/Plan
Broker Services, Inc. ("Fund/Plan"), a corporation duly organized and existing
under the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement among the Parties;
WHEREAS, Sage/Tso has been appointed investment adviser to the Trust;
WHEREAS, Fund/Plan is a broker-dealer registered with the U.S.
Securities and Exchange Commission and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement
providing for the distribution by Fund/Plan of the shares of the Trust (the
"Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Appointment.
-----------
The Trust hereby appoints Fund/Plan as its exclusive agent for the
distribution of the Shares in the fifty United States of America, the
District of Columbia and Commonwealth of Puerto Rico, and Fund/Plan
hereby accepts such appointment under the terms of this Agreement. The
Trust agrees that it will not sell any shares to any person except to
fill orders for the shares received through Fund/Plan; provided,
however, that the foregoing exclusive right shall not apply: (a) to
shares issued or sold
Page 2 of 10 pages.
<PAGE>
in connection with the merger or consolidation of any other investment
company with the Trust or the acquisition by purchase or otherwise of
all or substantially all of the assets of any investment company or
substantially all of the outstanding shares of any such company by the
Trust; (b) to shares which may be offered by the Trust to its
stockholders for reinvestment of cash distributed from capital gains or
net investment income of the Trust; or (c) to shares which may be
issued to shareholders of other funds who exercise any exchange
privilege set forth in the Trust's Prospectus. Notwithstanding any
other provision hereof, the Trust may terminate, suspend, or withdraw
the offering of the Shares whenever, in its sole discretion, it deems
such action to be desirable.
2. Sale and Repurchase of Shares.
-----------------------------
Fund/Plan agrees to provide the services contemplated hereby, and
(a) Fund/Plan is hereby granted the right, as agent for the Trust,
to sell Shares to the public against orders therefor at the
public offering price (as defined in sub- paragraph 2.(c)
below).
(b) Fund/Plan will also have the right to take, as agent for the
Trust, all actions which, in Fund/Plan's judgement, and
subject to the Trust's reasonable approval, are necessary to
carry into effect the distribution of the Shares.
(c) The public offering price for Class D Shares shall be the net
asset value per Share then in effect, and the public offering
price for Class A Shares shall be the net asset value per
Share plus a sales charge, if applicable.
(d) The net asset value of the Shares shall be determined in the
manner provided in the then current Prospectus and Statement
of Additional Information relating to the Shares, and when
determined shall be applicable to all transactions as provided
in the Prospectus. The net asset value of the Shares shall be
calculated by the Trust or by another entity on behalf of the
Trust. Fund/Plan shall have no duty to inquire into, or
liability for, the accuracy of the net asset value per Share
as calculated.
(e) On every sale, the Distributor shall promptly pay to the Trust
the
Page 3 of 10 pages.
<PAGE>
applicable net asset value of the Shares.
(f) Upon receipt of purchase instructions, Fund/Plan will transmit
such instructions to the Trust or its transfer agent for
registration of the Shares purchased.
(g) Nothing in this Agreement shall prevent Fund/Plan or any
affiliated person (as defined in the Act) of Fund/Plan from
acting as underwriter or distributor for any other person,
firm or corporation (including other investment companies), or
in any way limit or restrict Fund/Plan or such affiliated
person from buying, selling or trading any securities for its
or their own account or for the accounts of others for whom it
or they may be acting; provided, however, that Fund/Plan
expressly agrees that it will not for its own account purchase
any Shares of the Trust except for investment purposes, and
that it will not for its own account sell any such Shares
except by redemption of such Shares by the Trust, and that it
will not undertake in any activities which, in its judgement,
will adversely affect the performance of its obligations to
the Trust under this Agreement.
(h) Fund/Plan may repurchase Shares at such prices and upon such
terms and conditions as shall be specified in the Prospectus.
3. Rules of Sale of Shares.
-----------------------
Fund/Plan does not agree to sell any specific number of Shares.
Fund/Plan, as Underwriter for the Trust, undertakes to sell Shares on a
best efforts basis and only against orders received therefor. The Trust
reserves the right to terminate, suspend or withdraw the sale of its
Shares for any reason deemed adequate by it, and the Trust reserves the
right to refuse at any time or times to sell any of its Shares to any
person for any reason deemed adequate by it.
4. Rules of NASD.
-------------
(a) Fund/Plan will conform to the Rules of Fair Practice of the NASD
and the securities laws of any jurisdiction in which it directly
or indirectly sells any Shares.
(b) Fund/Plan will require each dealer with whom Fund/Plan has a
selling
Page 4 of 10 pages.
<PAGE>
agreement to conform to the applicable provisions of the
Prospectus, with respect to the public offering price of the
Shares, and Fund/Plan shall not cause the Trust to withhold
the placing of purchase orders so as to make a profit thereby.
(c) The Trust and Sage/Tso agree to furnish to Fund/Plan
sufficient copies of any and all: agreements, plans,
communications with the public or other materials which the
Trust or Sage/Tso intends to use in connection with any sales
of Shares, in adequate time for Fund/Plan to file and clear
such materials with the proper authorities before they are put
in use. Fund/Plan and the Trust or Sage/Tso may agree that any
such material does not need to be filed subsequent to
distribution. In addition, the Trust and Sage/Tso agree not to
use any such materials until so filed and cleared for use by
appropriate authorities as well as by Fund/Plan.
(d) Fund/Plan, at its own expense, will qualify as a dealer or
broker, or otherwise, under all applicable state or federal
laws required in order that the Shares may be sold in such
states as may be mutually agreed upon by the Parties.
(e) Fund/Plan shall remain registered with the U.S. Securities and
Exchange Commission and a member of the National Association
of Securities Dealers for the term of this Agreement.
(f) Fund/Plan shall not, in connection with any sale or
solicitation of a sale of the Shares, make or authorize any
representative, service organization, broker or dealer to make
any representations concerning the Shares, except those
contained in the Prospectus covering the Shares and in
communications with the public or sales materials approved by
Fund/Plan as information supplemental to such Prospectus.
Copies of the Prospectus will be supplied by the Trust or
Sage/Tso to Fund/Plan in reasonable quantities upon request.
5. Records to be Supplied by the Trust.
---------------------------------------
The Trust shall furnish to Fund/Plan copies of all information,
financial statements and other papers which Fund/Plan may reasonably
request for use in connection with the
Page 5 of 10 pages.
<PAGE>
distribution of the Shares including, but not limited to, one certified
copy of all financial statements prepared for the Trust by its
independent public accountants.
6. Expenses.
--------
(a) The Trust will bear the following expenses:
(i) preparation, setting in type, and printing of
sufficient copies of the Prospectuses and Statements
of Additional Information for distribution to
shareholders, and the cost of distribution of same
to the shareholders;
(ii) preparation, printing and distribution of reports
and other communications to shareholders;
(iii) registration of the Shares under the federal
securities laws;
(iv) qualification of the Shares for sale in the
jurisdictions as directed by the Trust;
(v) maintaining facilities for the issue and transfer of
the Shares;
(vi) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and
(vii) any original issue taxes or transfer taxes
applicable to the sale or delivery of the Shares or
certificates therefor.
(b) Sage/Tso will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
7. Term and Compensation.
----------------------
(a) The term of this Agreement shall commence on the date on which
the Trust's registration statement is declared effective by
the U.S. Securities and Exchange Commission ("Effective
Date").
(b) This Agreement shall remain in effect for two (2) years from
the Effective Date. This Agreement shall continue thereafter
for periods not exceeding one (1) year, if approved at least
annually (i) by a vote of a majority of the outstanding voting
securities of each Series; or (ii) by a vote of a majority of
the Trustees of the Trust who are not parties to this
Agreement (other than as Trustees of the Trust) or interested
persons of any such party, cast in person at a meeting called
for
Page 6 of 10 pages.
<PAGE>
the purpose of voting on such approval.
(c) Fees payable to Fund/Plan shall be paid by Sage/Tso as set
forth in Schedule "B" attached and shall be fixed for the two
(2) year period commencing on the Effective Date of this
Agreement. Thereafter, the fee schedule will be subject to
annual review and adjustment.
(d) This Agreement (i) may at any time be terminated without the
payment of any penalty, either by a vote of the Trustees of
the Trust or by a vote of a majority of the outstanding voting
securities of each Series with respect to such Series, on
sixty (60) days' written notice to Fund/Plan; and (ii) may be
terminated by Fund/Plan on sixty (60) days' written notice to
the Trust with respect to any Series.
(e) This Agreement shall automatically terminate in the event of
its assignment.
8. Indemnification of Fund/Plan by Sage/Tso.
----------------------------------------
Sage/Tso and the Trust will indemnify and hold Fund/Plan harmless for
the actions of Sage/Tso's employees registered with the NASD as
Fund/Plan representatives, and hereby undertakes to maintain
compliance with all rules and regulations concerning any and all sales
presentations made by such employees.
9. Liability of Fund/Plan.
----------------------
(a) Fund/Plan, its directors, officers, employees, shareholders
and agents shall not be liable for any error of judgement or
mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement, except a
loss resulting from a breach of Fund/Plan's obligation
pursuant to Section 4 of this Agreement (Rules of NASD), a
breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of
Fund/Plan in the performance of its obligations and duties or
by reason of its reckless disregard of its obligations and
duties under this Agreement.
(b) The Trust agrees to indemnify and hold harmless Fund/Plan
against any and all liability, loss, damages, costs or
expenses (including reasonable counsel fees) which Fund/Plan
may incur or be required to pay hereafter, in connection with
any action, suit or other proceeding, whether civil or
criminal, before any court
Page 7 of 10 pages.
<PAGE>
or administrative or legislative body, in which Fund/Plan may
be involved as a party or otherwise or with which Fund/Plan
may be threatened, by reason of the offer or sale of the Trust
Shares by persons other than Fund/Plan or its representatives,
prior to the execution of this Agreement. If a claim is made
against Fund/Plan as to which Fund/Plan may seek indemnity
under this Section, Fund/Plan shall notify the Trust promptly
after any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and
shall notify the Trust promptly of any action commenced
against Fund/Plan within 10 days time after Fund/Plan shall
have been served with a summons or other legal process, giving
information as to the nature and basis of the claim. Failure
so to notify the Trust shall not, however, relieve the Trust
from any liability which it may have on account of the
indemnity under this Section 9(b) if the Trust has not been
prejudiced in any material respect by such failure. The Trust
shall have the sole right to control the settlement of any
such action, suit or proceeding subject to Fund/Plan's
approval, which shall not be unreasonably withheld. Fund/Plan
shall have the right to participate in the defense of an
action or proceeding and to retain its own counsel, and the
reasonable fees and expenses of such counsel shall be borne by
the Trust (which shall pay such fees, costs and expenses at
least quarterly) if: (i) Fund/Plan has received an opinion of
counsel stating that the use of counsel chosen by the Trust to
represent Fund/Plan would present such counsel with a conflict
of interest; (ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and the Trust, and
legal counsel to Fund/Plan shall have reasonably concluded
that there are legal defenses available to it which are
different from or additional to those available to the Trust
or which may be adverse to or inconsistent with defenses
available to the Trust (in which case the Trust shall not have
the right to direct the defense of such action on behalf of
Fund/Plan); or (iii) the Trust shall authorize Fund/Plan to
employ separate counsel at the expense of the Trust.
Page 8 of 10 pages.
<PAGE>
(c) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an
officer, director, trustee, employee or agent of the Trust,
shall be deemed, when rendering services to the Trust or
acting on any business of the Trust (other than services or
business in connection with Fund/Plan's duties hereunder), to
be rendering such services to or acting solely for the Trust
and not as a director, officer, employee, shareholder or
agent, or one under the control or direction of Fund/Plan
even though receiving a salary from Fund/Plan.
(d) The Trust agrees to indemnify and hold harmless Fund/Plan,
and each person who controls Fund/Plan within the meaning of
Section 15 of the Securities Act of 1933, as amended (the
"Securities Act"), or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any and
all losses, claims, damages and liabilities, joint or several
(including any reasonable investigative, legal and other
expenses incurred in connection therewith) to which they, or
any of them, may become subject under the Act, the Securities
Act, the Exchange Act or other federal or state law or
regulation, at common law or otherwise insofar as such
losses, claims, damages or liabilities (or actions, suits or
proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a
material fact contained in a Prospectus, Statement of
Additional Information, supplement thereto, sales literature
or other written information prepared by the Trust and
furnished by the Trust to Fund/Plan for Fund/Plan's use
hereunder, disseminated by the Trust or which arise out of or
are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading. Such
indemnity shall not, however, inure to the benefit of
Fund/Plan (or any person controlling Fund/Plan) on account of
any losses, claims, damages or liabilities (or actions, suits
or proceedings in respect thereof) arising from the sale of
the Shares of the Trust to any person by Fund/Plan (i) if
such untrue statement or omission or alleged untrue statement
or omission was made in the Prospectus, Statement of
Additional Information, or supplement, sales or other
Page 9 of 10 pages.
<PAGE>
literature, in reliance upon and in conformity with
information furnished in writing to the Trust by Fund/Plan
specifically for use therein or (ii) if such losses, claims,
damages or liabilities arise out of or are based upon an
untrue statement or omission or alleged untrue statement or
omission found in any Prospectus, Statement of Additional
Information, supplement, sales or other literature,
subsequently corrected, but negligently distributed by
Fund/Plan and a copy of the corrected Prospectus was not
delivered to such person at or before the confirmation of the
sale to such person.
(e) Fund/Plan shall not be responsible for any damages,
consequential or otherwise, which Sage/Tso or the Trust may
experience, due to the disruption of the distribution of
Shares caused by any action or inaction of any registered
representative or affiliate of Fund/Plan or of Fund/Plan
itself.
10. Amendments.
----------
No provision of this Agreement may be amended or modified in any manner
whatsoever, except by a written agreement properly authorized and
executed by the Parties.
11. Section Headings.
----------------
Section and paragraph headings are for convenience only and shall not
be construed as part of this Agreement.
12. Reports.
-------
Fund/Plan shall prepare reports for the Board of Trustees of the Trust,
on a quarterly basis, showing such information as, from time to time,
shall be reasonably requested by such Board.
13. Severability.
------------
If any part, term or provision of this Agreement is held by any court
to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not
affected, and the rights and obligations of the Parties shall be
construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid
provided that the basic agreement is not thereby substantially
impaired.
Page 10 of 10 pages.
<PAGE>
14. Governing Law.
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Virginia and the exclusive venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
15. Authority to Execute
--------------------
The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has
been duly and validly authorized; and, when duly executed, this
Agreement will constitute a valid and legally binding and enforceable
obligation of each Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of
ten type written pages, together with Schedule "A" and Schedule "B", to be
signed by their duly authorized officers, as of the day and year first above
written.
Sage/Tso Investment Management L.P. Fund/Plan Broker Services, Inc.
- ---------------------------------- -------------------------------
/s/ James C. Tso /s/ Kenneth J. Kempf
----------------------------------- ----------------------------
By: James C. Tso, Esq., General Partner By: Kenneth J. Kempf, President
Sage/Tso Trust
- --------------
/s/ James C. Tso
-----------------------------
By: James C. Tso, Esq., President
Page 11 of 10 pages.
<PAGE>
SCHEDULE "A"
============
UNDERWRITER/SPONSOR SERVICES
FOR
SAGE/TSO TRUST
I. Underwriter/Sponsor services include:
------------------------------------
A) Preparation and execution of Underwriter and 12b-1 Plan
Agreements
o Monitoring accruals
o Monitoring expenses
o Disbursements for expenses and trail commissions
B) Quarterly 12b-1 Reports to Board of Trustees
C) Literature review, recommendations and submission to the NASD
D) Initial NASD Licensing and Transfers of Registered
Representatives
o U-4 Form and Fingerprint Submission to NASD
o Supplying Series 6 and 63 written study material
o Registration for Exam Preparation classes
o Renewals and Terminations of Representatives
E) Written supervisory procedures and manuals for Registered
Representatives
F) Ongoing compliance updates for Representatives regarding sales
practices, written correspondence and other communications
with the public.
G) NASD Continuing Education Requirement
II. Sales Support
-------------
FPBS offers additional optional sales support including Inbound
Telemarketing and Literature Fulfillment.
III. Inbound Telemarketing Services
------------------------------
A) Install an 800 line for prospective shareholders, and track
the number of inbound calls. An existing 800 line can be moved
to FPBS.
B) Calls answered with the name of your Fund Group by Fund/Plan
Broker Services' registered representatives
C) Utilize pre-approved scripts provided by Trust Management
<PAGE>
D) Respond to Trust inquiries as your Trust's Marketing
Department
o Requests for Literature/Prospectuses
o Yields, Distribution Rates
o Performance
o Adviser/Management experience
o Dividends
o Portfolio Holdings
o Account Attributes
E) Input marketing inquiries on a confidential database for Trust
Management review.
F) Written Call reports which include the following information.
o Number received
o Alphabetical list
o Regional Response List
o Source List
o Match calls with new accounts on Transfer Agent
files
G) Prepare Quarterly Report that matches calls with new accounts
in our Transfer Agent files.
IV. Literature Fulfillment
----------------------
A) Receive requests from the Trust for literature fulfillment
B) Record requests on confidential database for Trust reporting
C) Prepare, package and forward customized requests
D) Assist with special direct mail programs
<PAGE>
SCHEDULE "B"
------------
UNDERWRITER AND DISTRIBUTION FEE SCHEDULE
FOR
SAGE/TSO TRUST
This Fee Schedule is fixed for a period of two (2) years from the
Effective Date as that terms is defined in the Agreement.
I. A) Underwriter/Sponsor Services
----------------------------
The annual fee to Fund/Plan Broker Services (FPBS) of $25,000
for the initial series or class of shares and $2,500 for each
additional series or class of shares for services rendered as
primary Underwriter/Sponsor of the Trust, including primary
licensing/regulatory agent for Trust personnel.
The fee for representing the Trust as primary Distributor
includes the expenses and personnel required to maintain the
various regulatory books and records of the Broker/Dealer and
maintenance of shareholder files and records for all
transactions processed on behalf of the Trust. These fees also
include the regulatory requirements of all marketing related
and distribution reports including maintenance of records
regarding individual transaction activities of the Trust's
registered representatives.
B) FPBS will maintain annual NASD and state license renewals and
the monitoring required of representative activities as
follows:
Up to 10 States - $2,000 per Representative per Year
All 50 States - $4,000 per Representative per Year
II. Literature Fulfillment Services
-------------------------------
$2.00 per inquiry and fulfillment request
$2,000 per month minimum fee
<PAGE>
SCHEDULE "C"
============
Identification of Series
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Sage/Tso Trust"
1. America Asia Allocation Growth Fund - Class A Shares
2. America Asia Allocation Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this day of , 1996, between SAGE/TSO TRUST,
a Delaware business trust organized and existing under the laws of
the State of Delaware, having its principal office and place of
business at 7799 Leesburg, Suite 900, Falls Church, Virginia 22124
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
WHEREAS, the Fund represents that pursuant to the Custody
Administration and Agency Agreement between Fund/Plan Services, Inc.
("Fund/Plan") and the Fund, Fund/Plan (a) has agreed to perform
certain administrative functions which may include the functions of
administrator, transfer agent and accounting services agent and (b)
has been appointed by the Fund to act as its agent in respect of
certain transactions contemplated in this Agreement; and
WHEREAS, the Fund represents that (a) Fund/Plan has agreed to
act as Fund's agent in respect of certain transactions contemplated
in this Agreement and (b) the Bank is authorized and directed to rely
upon and follow Certificates and instructions given by Fund/Plan, the
Fund's agent, in respect of transactions contemplated in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
<PAGE>
1. "Administrator" shall mean Fund/Plan Services, Inc. and such
successors or permitted assigns as may succeed and perform its duties
under the Administration Agreement.
2. "Administration Agreement" shall mean that certain separate
agreement entitled "Custody Administration and Agency Agreement"
dated as of _______________, 1996 between the Fund and the Fund/Plan
Services, Inc.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and fed- eral agency securities,
its successor or successors and its nominee or nominees.
4. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received by the Custodian
and signed on behalf of the Fund by any two Officers, and the term
Certificate shall also include instructions communicated to the
Custodian by the Administrator by Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which
is a clearing member under the rules of O.C.C. and a member of a
national securities exchange quali- fied to act as a custodian for an
investment company, or any broker-dealer reasonably believed by the
Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged
to the Custodian as security for, and in consideration of, the
Custodian's issuance of (a) any Put Option guarantee letter or
similar document described in paragraph 8 of Article V herein, or (b)
any receipt described in Article V or VIII herein.
8. "Covered Call Option" shall mean an exchange traded option
entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer
thereof the specified underlying Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
9. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and
- 2 -
<PAGE>
Exchange Commission, its successor or successors and its nominee or
nominees. The term "Depository" shall further mean and include any
other person authorized to act as a depository under the Investment
Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits
therein by the Custodian.
10. "Financial Futures Contract" shall mean the firm commitment
to buy or sell fixed income securities including, without limitation,
U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds,
domestic bank certificates of deposit, and Eurodollar certificates of
deposit, during a specified month at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with respect
to a Futures Contract.
13. "Margin Account" shall mean a segregated account in the name
of a broker, dealer, futures commission merchant, or a Clearing
Member, or in the name of the Fund for the benefit of a broker,
dealer, futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or a
Clearing Member (a "Margin Account Agreement"), separate and distinct
from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in
connection with such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or the Depository
shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
14. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations
issued or guaranteed as to interest and principal by the government
of the United States or agencies or instrumentalities thereof, any
tax, bond or revenue anticipation note issued by any state or
municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to the same and bank time deposits, where the
purchase and sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale.
15. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
- 3 -
<PAGE>
16. "Officers" shall be deemed to include the President, any
Vice President, the Secretary, the Clerk, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Clerk, any
Assistant Treasurer, and any other person or persons, including
officers or employees of the Administrator, whether or not any such
other person is an officer of the Fund, duly authorized by the Board
of Trustees of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other Certificate as
may be received by the Custodian from time to time.
17. "Option" shall mean a Call Option, Covered Call Op- tion,
Stock Index Option and/or a Put Option.
18. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably
believed by the Custodian to be an Officer.
19. "Put Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities, to
sell such Securities to the writer thereof for the exercise price.
20. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase
such Securities at a described or specified date and price.
21. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Stock Index
Options, Stock Index Futures Contracts, Stock Index Futures Contract
Options, Financial Futures Contracts, Financial Futures Contract
Options, Reverse Repurchase Agreements, common stocks and other
securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and
by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase, sell or
subscribe for the same, or evidencing or representing any other
rights or interest therein, or any property or assets.
22. "Senior Security Account" shall mean an account maintained
and specifically allocated to a Series under the terms of this
Agreement as a segregated account, by recorda- tion or otherwise,
within the custody account in which certain Securities and/or other
assets of the Fund specifically allocated to such Series shall be
deposited and withdrawn from
- 4 -
<PAGE>
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may from
time to time determine.
23. "Series" shall mean the various portfolios, if any, of the
Fund as described from time to time in the current and effective
prospectus for the Fund and listed on Appendix B hereto as amended
from time to time.
24. "Shares" shall mean the shares of beneficial inter- est of
the Fund, each of which is, in the case of a Fund hav- ing Series,
allocated to a particular Series.
25. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount
times the difference between the value of a particular stock index at
the close of the last business day of the contract and the price at
which the futures contract is originally struck.
26. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of
cash determined by reference to the difference between the exercise
price and the value of the index on the date of exercise.
27. "Terminal Link" shall mean an electronic data transmission
link between the Administrator on behalf of the Fund and the
Custodian requiring in connection with each use of the Terminal Link
by or on behalf of the Administrator on behalf of the Fund use of an
authorization code provided by the Custodian and at least two access
codes established by the Administrator on behalf of the Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Fund
during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
- 5 -
<PAGE>
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered
to the Custodian all Securities and all moneys owned by it, at any
time during the period of this Agreement, and shall specify with
respect to such Securities and money the Series to which the same are
specifically allocated. The Custodian shall segregate, keep and
maintain the assets of the Series separate and apart. The Custodian
will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previously
made and moneys are not finally collected. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the
Fund, substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated and to utilize the Book-Entry System
to the extent possible in connection with its performance hereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries
and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in the Depository, the
Fund shall deliver to the Custodian a certified resolution of the
Board of Trustees of the Fund, substantially in the form of Exhibit B
hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by a
Certificate actually received by the Custodian to deposit in the
Depository all Securities specifically allocated to such Series
eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with
its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either the Book-Entry
System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers, including,
but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the
applicable Series. Prior to the Custodian's accepting, utilizing and
acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement,
the Custodian shall have received a certified resolution of the
Fund's Board of Trustees, substantially in the
- 6 -
<PAGE>
form of Exhibit C hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis, until instructed to the
contrary by a Certificate actually received by the Custodian, to
accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts,
in the name of each Series, and shall credit to the separate account
for each Series all moneys received by it for the account of the Fund
with respect to such Series. Money credited to a separate account for
a Series shall be disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series
account from which payment is to be made and the purpose for which
payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Administrator with confirmations and a
summary, on a per Series basis, of all transfers to or from the
account of the Fund for a Series, either hereunder or with any
co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the
account of the Fund for a Series, the Custodian shall also by
book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fun- gible bulk of Securities registered
in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian
shall furnish the Administrator with a detailed statement, on a per
Series basis, of the Securities and moneys held by the Custodian for
the Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held hereunder may be
registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to
time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish or cause to be furnished
- 7 -
<PAGE>
to the Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry
System or the Depository any Securities which it may hold hereunder
and which may from time to time be registered in the name of the
Fund. The Custodian shall hold all such Securities specifically
allocated to a Series which are not held in the Book-Entry System or
in the Depository in a separate account in the name of such Series
physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian
by itself, or through the use of the Book-Entry System or the
Depository with respect to Securities held hereunder and therein
deposited, shall with respect to all Securities held for the Fund
hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon
such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of
such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the
Custodian without the prior notification or consent of the Fund;
(c) Present for payment and collect the amount pay-
able upon all Securities which mature;
(d) Surrender Securities in temporary form for de-
finitive Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the
laws or regulations of any other taxing authority now or hereafter in
effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of a Series, all rights and similar securities issued with
respect to any Securities held by the Custodian for such Series
hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry Sys- tem or
the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and
any other instruments whereby the authority of the
- 8 -
<PAGE>
Fund as owner of any Securities held by the Custodian hereunder for
the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically
allocated to such Series any cash or other Securities received in
exchange;
(c) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate to any protective
committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and receive
and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as
shall be stated in such Certificate to be for the purpose of
effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitaliza- tion of the Fund; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article
which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any
instrument or certificate representing any Futures Contract, any
Option, or any Futures Contract Option until after it shall have
determined, or shall have received a Certificate from the Fund
stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than
the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as amended,
in connection with the purchase, sale, settlement, closing out or
writing of Futures Contracts, Options, or Futures Contract Options by
making payments or deliveries specified in Certificates received by
the Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
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brokers, dealers, or future commission merchants with respect to such
Futures Contracts, Options, or Futures Contract Options, as the case
may be, confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or otherwise, in
the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account and
payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of
the Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstanding any
provision in this Agreement to the contrary, make payment for any
Futures Contract, Option, or Futures Contract Option for which such
instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate, and
deliver any Futures Contract, Option or Futures Contract Option for
which such instruments or such certificates are available only
against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by
the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other
than a purchase of an Option, a Futures Contract, or a Futures
Contract Option, the Fund shall deliver or cause the Administrator to
deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each
such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of
the Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of purchase and
settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or
the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom
payment is to be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the broker specified
in the Certificate out of the moneys held for the account of such
Series the total
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amount payable upon such purchase, provided that the same conforms to
the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other
than a sale of any Option, Futures Contract, Futures Contract Option,
or any Reverse Repurchase Agreement, the Fund shall deliver or cause
the Administrator to deliver to the Custodian (i) with respect to
each sale of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate or Oral Instructions, specifying with
respect to each such sale: (a) the Series to which such Securities
were specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or principal amount sold,
and accrued interest, if any; (d) the date of sale; (e) the sale
price per unit; (f) the total amount payable to the Fund upon such
sale; (g) the name of the broker through whom or the person to whom
the sale was made, and the name of the clearing broker, if any; and
(h) the name of the broker to whom the Securities are to be
delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate
against payment upon receipt of the total amount payable to the Fund
upon such sale, provided that the same conforms to the total amount
payable as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically
allocated; (b) the type of Option (put or call); (c) the name of the
issuer and the title and number of shares subject to such Option or,
in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options purchased; (d)
the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in
connection with such purchase; (h) the name of the Clearing Member
through whom such Option was purchased; and (i) the name of the
broker to whom payment is to be made. The Custodian shall pay, upon
receipt of a Clearing Member's statement confirming the purchase of
such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for the
account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the
Clearing Member
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through whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying
with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c)
the name of the issuer and the title and number of shares subject to
such Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund upon such sale;
and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold
by the Clearing Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article with respect to
such Option against payment to the Custodian of the total amount
payable to the Fund, provided that the same conforms to the total
amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the
name of the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to
be paid by the Fund upon such exercise; and (g) the name of the
Clearing Member through whom such Call Option was exercised. The
Custodian shall, upon receipt of the Securities underlying the Call
Option which was exercised, pay out of the moneys held for the
account of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the same conforms
to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the
name of the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to
be paid to the Fund upon such exercise; and (g) the name of the
Clearing
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Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the same
conforms to the amount payable to the Fund as set forth in such
Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Stock Index Option: (a)
the Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c) the
number of Options being exercised; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price; (g)
the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Covered Call Option:
(a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c)
the expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or cause to be
delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts
as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or
direct the Depository to impose, upon the underlying Securities
specified in the Certificate specifically allocated to such Series
such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon
prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian
and not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate instructing the Custodian to deliver, or to
direct the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the
title and number of shares subject to the Covered Call Option; (c)
the Clearing Member to
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whom the underlying Securities are to be delivered; and (d) the total
amount payable to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6 of
this Article, the Custodian shall deliver, or direct the Depository
to deliver, the underlying Securities as specified in the Certificate
against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall deliver
or cause the Administrator to deliver to the Custodian a Certificate
specifying with respect to such Put Option: (a) the Series for which
such Put Option was written; (b) the name of the issuer and the title
and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price;
(e) the premium to be received by the Fund; (f) the date such Put
Option is written; (g) the name of the Clearing Member through whom
the premium is to be received and to whom a Put Option guarantee
letter is to be delivered; (h) the amount of cash, and/or the amount
and kind of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making
the deposits into the Collateral Account specified in the
Certificate, issue a Put Option guarantee letter substantially in the
form utilized by the Custodian on the date hereof, and deliver the
same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding
the foregoing, the Custodian shall be under no obligation to issue
any Put Option guarantee letter or similar document if it is unable
to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in
the preceding paragraph is exercised, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the
Put Option; (c) the Clearing Member from whom the underlying
Securities are to be received; (d) the total amount payable by the
Fund upon such delivery; (e) the amount of cash and/or the amount and
kind of Securities specifically allocated to such Series to be
withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically
allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put
Option guarantee letter or similar document issued by the Custodian
in connection with such Put Option, the Custodian shall pay out of
the moneys held for the
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account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member specified
in the Certificate as set forth in such Certificate against delivery
of such Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Stock Index Option: (a)
the Series for which such Stock Index Option was written; (b) whether
such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member
through whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Collateral Account for such Series; and (k) the amount of cash and/or
the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian
shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in
the Certificate, and either (1) deliver such receipts, if any, which
the Custodian has specifically agreed to issue, which are in
accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the
Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Stock Index
Option: (a) the Series for which such Stock Index Option was written;
(b) such information as may be necessary to identify the Stock Index
Option being exercised; (c) the Clearing Member through whom such
Stock Index Option is being exercised; (d) the total amount payable
upon such exercise, and whether such amount is to be paid by or to
the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f)
the amount of cash and/or amount and kind of Securities, if any, to
be withdrawn from the Senior Security Account for such Series; and
the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account for such Series. Upon the
return and/or cancellation of the receipt, if any, delivered pursuant
to the preceding paragraph of this Article, the Custodian shall pay
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out of the moneys held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as
specified therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this
Article in a transaction expressly designated as a "Closing Purchase
Transaction" in order to liquidate its position as a writer of an
Option, the Fund shall deliver or cause the Administrator to deliver
to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c) the
name of the issuer and the title and number of shares subject to the
Option, or, in the case of a Stock Index Option, the stock index to
which such Option relates and the number of Options held; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the
expiration date; (g) the type of Option (put or call); (h) the date
of such purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Collateral
Account, a specified Margin Account, or the Senior Security Account
for such Series. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option
being liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the
previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written
by the Fund and described in this Article, the Custodian shall delete
such Option from the statements delivered to the Fund pursuant to
paragraph 3 Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of
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identical Futures Contract(s)): (a) the Series for which the Futures
Contract is being entered; (b) the category of Futures Contract (the
name of the underlying stock index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the delivery
or settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short)
on such Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer,
or futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the
terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account for such Series the amount
of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required
to be made by the Fund to a broker, dealer, or futures commission
merchant with respect to an outstanding Futures Contract, shall be
made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with
respect to an outstanding Futures Contract, shall be received and
dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder
is retained by the Fund until delivery or settlement is made on such
Futures Contract, the Fund shall deliver or cause the Administrator
to deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount
to be paid or received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant to
or from whom payment or delivery is to be made or received; and (d)
the amount of cash and/or Securities to be withdrawn from the Senior
Security Account for such Series. The Custodian shall make the
payment or delivery specified in the Certificate, and delete such
Futures Contract from the statements delivered to the Fund pursuant
to paragraph 3 of Article III herein.
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4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and delete the
Futures Contract being offset from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein, and make such
withdrawals from the Senior Security Account for such Series as may
be specified in such Certificate. The withdrawals, if any, to be made
from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by
the Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect to
such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information
as may be necessary to identify the Futures Contract underlying the
Futures Contract Option purchased; (d) the expiration date; (e) the
exercise price; (f) the dates of purchase and settlement; (g) the
amount of premium to be paid by the Fund upon such purchase; (h) the
name of the broker or futures commission merchant through whom such
option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series,
the total amount to be paid upon such purchase to the broker or
futures commissions merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such
Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b)
the type of Future Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option;
(d) the date of sale; (e) the sale price; (f) the date of settlement;
(g) the total amount payable to the Fund upon such sale;
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and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed against
payment to the Custodian of the total amount payable to the Fund,
provided the same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract
Option was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the date
of exercise; (e) the name of the broker or futures commission
merchant through whom the Futures Contract Option is exercised; (f)
the net total amount, if any, payable by the Fund; (g) the amount, if
any, to be received by the Fund; and (h) the amount of cash and/or
the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall make, out of
the moneys and Securities specifically allocated to such Series, the
payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund
shall deliver or cause the Administrator to deliver to the Custodian
a Certificate specifying with respect to such Futures Contract
Option: (a) the Series for which such Futures Contract Option was
written; (b) the type of Futures Contract Option (put or call); (c)
the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price; (f)
the premium to be received by the Fund; (g) the name of the broker or
futures commission merchant through whom the premium is to be
received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account
for such Series. The Custodian shall, upon receipt of the premium
specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series the deposits into the Senior
Security Account, if any, as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which
is a call is exercised, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certifi- cate specifying:
(a) the Series to which such Futures Contract
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Option was specifically allocated; (b) the particular Futures
Contract Option exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the name of the broker or
futures commission merchant through whom such Futures Contract Option
was exercised; (e) the net total amount, if any, payable to the Fund
upon such exercise; (f) the net total amount, if any, payable by the
Fund upon such exercise; and (g) the amount of cash and/or the amount
and kind of Securities to be deposited in the Senior Security Account
for such Series. The Custodian shall, upon its receipt of the net
total amount payable to the Fund, if any, specified in such
Certificate make the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall deliver or cause
the Administrator to deliver to the Custodian a Certificate
specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c)
the type of Futures Contract underlying such Futures Contract Option;
(d) the name of the broker or futures commission merchant through
whom such Futures Contract Option is exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the net
total amount, if any, payable by the Fund upon such exercise; and (g)
the amount and kind of Securities and/or cash to be withdrawn from or
deposited in, the Senior Security Account for such Series, if any.
The Custodian shall, upon its receipt of the net total amount payable
to the Fund, if any, specified in the Certificate, make out of the
moneys and Securities specifically allocated to such Series, the
payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by the
Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option described
in this Article in order to liquidate its position as a writer of
such Futures Contract Option, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying
with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Future Contract
and such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the
expiration date; (g) the name of the broker or futures commission
merchant to whom the premium is to be paid; and (h)
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the amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security
Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian
shall (a) delete such Futures Contract Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein
and, (b) make such withdrawals from and/or in the case of an exercise
such deposits into the Senior Security Account as may be specified in
a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise
of a Futures Contract Option described in this Article shall be
subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying: (a) the Series for which such
short sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and
settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of cash
and/or the amount and kind of Securities, if any, which are to be
deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker through
whom such short sale was made. The Custodian shall upon its receipt
of a statement from such broker confirming such sale and that the
total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the account
of the Custodian (or any nominee of the Custodian) as custodian of
the Fund, issue a receipt or make the deposits into the Margin
Account and the Senior Security Account specified in the Certificate.
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2. In connection with the closing-out of any short sale, the
Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying with respect to each such closing
out: (a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase
price per unit; (f) the net total amount payable to the Fund upon
such closing-out; (g) the net total amount payable to the broker upon
such closing-out; (h) the amount of cash and the amount and kind of
Securities to be withdrawn, if any, from the Margin Account; (i) the
amount of cash and/or the amount and kind of Securities, if any, to
be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The
Custodian shall, upon receipt of the net total amount payable to the
Fund upon such closing-out, and the return and/or cancellation of the
receipts, if any, issued by the Custodian with respect to the short
sale being closed-out, pay out of the moneys held for the account of
the Fund to the broker the net total amount payable to the broker,
and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder,
the Fund shall deliver or cause the Administrator to deliver to the
Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the Series for which the Reverse
Repurchase Agreement is entered; (b) the total amount payable to the
Fund in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer
through or with whom the Reverse Repurchase Agreement is entered; (d)
the amount and kind of Securities to be delivered by the Fund to such
broker or dealer; (e) the date of such Reverse Repurchase Agreement;
and (f) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in a
Senior Security Account for such Series in connection with such
Reverse Repurchase Agreement. The Custodian shall, upon receipt of
the total amount payable to the Fund specified in the Certificate or
Oral Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Senior Security Account, specified in such
Certificate or Oral Instructions.
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2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall
deliver or cause the Administrator to deliver a Certificate or, in
the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable
by the Fund in connection with such termination; (c) the amount and
kind of Securities to be received by the Fund and specifically
allocated to such Series in connection with such termination; (d) the
date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated;
and (f) the amount of cash and/or the amount and kind of Securities
to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the amount and kind of
Securities to be received by the Fund specified in the Certificate or
Oral Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Senior Security Account, specified in
such Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause the Administrator to deliver to the Custodian a
Certificate specifying with respect to each such loan: (a) the Series
to which the loaned Securities are specifically allocated; (b) the
name of the issuer and the title of the Securities, (c) the number of
shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified, and (f)
the name of the broker, dealer, or financial institution to which the
loan was made. The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial institution to which
the loan was made upon receipt of the total amount designated as to
be delivered against the loan of Securities. The Custodian may accept
payment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certified or
bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds and may deliver
Securities in accordance with the customs prevailing among dealers in
securities.
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2. Promptly after each termination of the loan of Securities by
the Fund, the Fund shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying with respect to
each such loan termination and return of Securities: (a) the Series
to which the loaned Securities are specifically allocated; (b) the
name of the issuer and the title of the Securities to be returned,
(c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities minus
any offsetting credits as described in said Certificate), and (f) the
name of the broker, dealer, or financial institution from which the
Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution
to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits
to, or withdrawals from, a Senior Security Account as specified in a
Certificate received by the Custodian. Such Certificate shall specify
the Series for which such deposit or withdrawal is to be made and the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited in, or withdrawn from, such
Senior Security Account for such Series. In the event the Certificate
fails to specify the Series, the name of the issuer, the title and
the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from,
a Senior Securities Account, the Custodian shall be under no
obligation to make any such deposit or withdrawal and shall so notify
the Administrator.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or
Clearing Member in whose name, or for whose benefit, the account was
established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
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4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in
any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any
such property whenever the Custodian has made payment or delivery
pursuant to any Put Option guarantee letter or similar document or
any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the Fund
with a statement with respect to each Margin Account in which money
or Securities are held specifying as of the close of business on the
previous business day: (a) the name of the Margin Account; (b) the
amount and kind of Securities held therein; and (c) the amount of
money held therein. The Custodian shall make available upon request
to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in
which cash and/or Securities are maintained in a Collateral Account
for any Series, the Custodian shall furnish the Administrator with a
statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held therein.
No later than the close of business next succeeding the delivery to
the Fund of such statement, the Fund shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying
the then market value of the Securities described in such statement.
In the event such then market value is indicated to be less than the
Custodian's obligation with respect to any outstanding Put Option
guarantee letter or similar document, the Fund shall promptly specify
or cause the Administrator to promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral
Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall deliver or cause the Administrator to deliver
to the Custodian a copy of the resolution of the Board of Trustees of
the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein
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the date of the declaration of a dividend or distribution, the date
of payment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per Share of such
Series to the shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii)
authorizing with respect to the Series specified therein the
declaration of dividends and distributions on a daily basis and
authorizing the Custodian to rely on Oral Instructions or a
Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable
to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall
pay out of the moneys held for the account of each Series the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or
cause the Administrator to deliver to the Custodian a Certificate
duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate
account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of
the money held for the account of such Series, all original issue or
other taxes required to be paid by the Fund in connection with such
issuance upon the receipt of a Certificate specifying the amount to
be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by
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<PAGE>
the Custodian hereunder in connection with a redemption of any
Shares, it shall deliver or cause the Administrator to deliver to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting
forth the Series and number of Shares received by the Transfer Agent
for redemption and that such Shares are in good form for redemption,
the Custodian shall make payment to the Transfer Agent out of the
moneys held in the separate account in the name of the Series the
total amount specified in the Certificate delivered pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption
of any Shares, whenever any Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the
Fund, the Custodian, unless otherwise instructed by a Certificate,
shall, upon receipt of an advice from the Fund or its agent setting
forth that the redemption is in good form for redemption in
accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the
moneys held in the separate account of the Series of the Shares being
redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds
on behalf of any Series which results in an overdraft because the
moneys held by the Custodian in the separate account for such Series
shall be insufficient to pay the total amount payable upon a purchase
of Securities specifically allocated to such Series, as set forth in
a Certificate or Oral Instructions, or which results in an overdraft
in the separate account of such Series for some other reason, or if
the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New
York under the Fund's Cash Management and Related Services Agreement,
(except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan
made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum
(based on a 360-day year for the actual number of days involved)
equal to 1/2% over
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Custodian's prime commercial lending rate in effect from time to
time, such rate to be adjusted on the effective date of any change in
such prime commercial lending rate but in no event to be less than 6%
per annum. In addition, the Fund hereby agrees that the Custodian
shall have a continuing lien and security interest in and to any
property specifically allocated to such Series at any time held by it
for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole discretion, at
any time to charge any such overdraft or indebtedness together with
interest due thereon against any balance of account standing to such
Series' credit on the Custodian's books. In addition, the Fund hereby
covenants that on each Business Day on which either it intends to
enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York
City time, advise the Custodian, in writing, of each such borrowing,
shall specify the Series to which the same relates, and shall not
incur any indebtedness not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for investment
or for temporary or emergency purposes using Securities held by the
Custodian hereunder as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the
total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and (h)
a statement specifying whether such loan is for investment purposes
or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date
specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to
the total amount
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payable as set forth in the Certificate. The Custodian may, at the
option of the lending bank, keep such collateral in its possession,
but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The
Custodian shall deliver such Securities as additional collateral as
may be specified in a Certificate to collateralize further any
transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to
the Custodian, and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the
Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by the Custodian,
the Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the Administrator
on behalf of the Fund be obligated to have or utilize the Terminal
Link, and the provisions of this Article shall apply if, but only if,
the Fund in its sole and absolute discretion directs the
Administrator to utilize the Terminal Link to transmit Certificates
to the Custodian.
2. The Terminal Link shall be utilized by the Administrator on
behalf of the Fund only for the purpose of providing Certificates to
the Custodian with respect to transactions involving Securities or
for the transfer of money to be applied to the payment of dividends,
distributions or redemptions of Fund Shares, and shall be utilized by
the Custodian only for the purpose of providing notices to the
Administrator. Such use shall commence only after the Fund shall have
delivered or caused the Administrator to have delivered to the
Custodian a Certificate substantially in the form of Exhibit D and
shall have established access codes. Each use of the Terminal Link by
the Administrator shall constitute a representation and warranty that
the Terminal Link is being used only for the purposes permitted
hereby, that at least two Officers have each utilized an access code,
that such safekeeping procedures have been established, and that such
use does not contravene the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
3. The Administrator shall obtain and maintain at its own cost
and expense all equipment and services, including, but not limited to
communications services, necessary for it to utilize the Terminal
Link, and the Custodian shall not be responsible for the reliability
or availability of any such equipment or services.
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4. The Fund and the Administrator each acknowledge that any data
bases made available as part of, or through the Terminal Link and any
proprietary data, software, processes, information and documentation
(other than any such which are or become part of the public domain or
are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential
property of the Custodian. The Fund and the Administrator shall, and
shall cause others to which either discloses the Information, to keep
the Information confidential by using the same care and discretion it
uses with respect to its own confidential property and trade secrets,
and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, the Fund
and the Administrator shall return to the Custodian any and all
copies of the Information which are in its respective possession or
under its respective control, or which either distributed to third
parties. The provisions of this Article shall not affect the
copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link
from time to time without notice to the Fund or the Administrator
except that the Custodian shall give the Administrator notice not
less than 75 days in advance of any modification which would
materially adversely affect the Administrator's operation, and the
Administrator agrees that the it shall not modify or attempt to
modify the Terminal Link without the Custodian's prior written
consent. The Fund acknowledges that any software or procedures
provided the Fund as part of the Terminal Link are the property of
the Custodian and, accordingly, the Administrator agrees that any
modifications to the Terminal Link, whether by the Administrator, or
by the Custodian and whether with or without the Custodian's consent,
shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Fund utilizes in connection with the Terminal Link
makes any warranties or representations, express or implied, in fact
or in law, including but not limited to warranties of merchantability
and fitness for a particular purpose.
8. The Administrator will cause its officers and employees
to treat the authorization codes and the access codes applicable to
Terminal Link with extreme care, and the Fund and the Administrator
irrevocably authorizes the Custodian to act in accordance with and
rely on Certificates received by it through the Terminal Link. The
Fund acknowledges that it is the Administrator's responsibility to
assure that only Officers use the Terminal Link, and that Custodian
shall
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not be responsible nor liable for use of the Terminal Link by persons
other than such persons or Officers, or by only a single Officer, nor
for any alteration, omission, or failure to promptly forward.
9(a). Except as otherwise specifically provided in Section 9(b)
of this Article, the Custodian shall have no liability for any
losses, damages, injuries, claims, costs or expenses arising out of
or in connection with any failure, malfunction or other problem
relating to the Terminal Link except for money damages suffered as
the direct result of the negligence of the Custodian in an amount not
exceeding for any incident $100,000 provided, however, that the
Custodian shall have no liability under this Section 9 if the
Administrator fails to comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in executing
or failing to execute in accordance with a Certificate received
through Terminal Link shall be only with respect to a transfer of
funds which is not made in accordance with such Certificate after
such Certificate shall have been duly acknowledged by the Custodian,
and shall be contingent upon the Administrator complying with the
provisions of Section 12 of this Article, and shall be limited to (i)
restoration of the principal amount mistransferred, if and to the
extent that the Custodian would be required to make such restoration
under applicable law, and (ii) the lesser of (A) the Fund's actual
pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred, as the
case may be, or (B) compensation for the loss of the use of the
mistransferred funds or the funds which were not transferred, as the
case may be, at a rate per annum equal to the average federal funds
rate as computed from the Federal Reserve Bank of New York's daily
determination of the effective rate for federal funds, for the period
during which a Fund has lost use of such funds. In no event shall the
Custodian have any liability for failing to execute in accordance
with a Certificate a transfer of funds where the Certificate is
received by the Custodian through Terminal Link other than through
the applicable transfer module for the particular instructions
contained in such Certificate.
10. Without limiting the generality of the foregoing, in no
event shall the Custodian or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal
Link be responsible for any special, indirect, incidental or
consequential damages which the Fund or the Administrator may incur
or experience by reason of its use of the Terminal Link even if the
Custodian or any manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the
Terminal Link shall the Custodian or any such manufacturer or
supplier be liable for acts of God, or with respect to the following
to the extent beyond such person's reasonable control: machine or
computer
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breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other similar or
dissimilar cause.
11. The Fund shall cause the Administrator to notify the
Custodian of any errors, omissions or interruptions in, or delay or
unavailability of, the Terminal Link as promptly as practicable, and
in any event within 24 hours after the earliest of (i) discovery
thereof, (ii) the Business Day on which discovery should have
occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice
which reflects such error, it being agreed that discovery and receipt
of notice may only occur on a business day. The Custodian shall
promptly advise the Fund whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall verify to the Administrator, by use of
the Terminal Link, receipt of each Certificate the Custodian receives
through the Terminal Link, and in the absence of such verification
the Custodian shall not be liable for any failure to act in
accordance with such Certificate and neither the Fund nor the
Administrator may claim that such Certificate was received by the
Custodian. Such verification, which may occur after the Custodian has
acted upon such Certificate, shall be accomplished on the same day on
which such Certificate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Foreign Securities (as such term is
defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, as amended) and other assets, the foreign
banking institutions and foreign securities depositories and clearing
agencies designated on Schedule I hereto ("Foreign Sub-Custodians")
to carry out their respective responsibilities in accordance with the
terms of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been previously
delivered to the Fund and receipt of which is hereby acknowledged
(each such agreement, a "Foreign Sub- Custodian Agreement"). Upon
receipt of a Certificate, together with a certified resolution
substantially in the form attached as Exhibit E of the Fund's Board
of Trustees, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such
entity to act as the Custodian's agent, as its sub-custodian and any
such
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<PAGE>
additional foreign sub-custodian shall be deemed added to Schedule I.
Upon receipt of a Certificate from the Fund, the Custodian shall
cease the employment of any one or more Foreign Sub-Custodians for
maintaining custody of the Fund's assets and such Foreign
Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially
in the form previously delivered to the Fund and will not be amended
in a way that materially adversely affects the Fund without the
Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to
each Series of the Fund the Foreign Securities of such Series held by
each Foreign Sub-Custodian. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claims by the Fund or any Series against a Foreign
Sub-Custodian as a consequence of any loss, damage, cost, expense,
liability or claim sustained or incurred by the Fund or any Series if
and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with
the terms of the applicable Foreign Sub- Custodian Agreement, use
reasonable efforts to arrange for the independent accountants of the
Fund to be afforded access to the books and records of any Foreign
Sub-Custodian insofar as such books and records relate to the
performance of such Foreign Sub-Custodian under its agreement with
the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and
other assets of each Series held by Foreign Sub-Custodians, including
but not limited to, an identification of entities having possession
of each Series' Foreign Securities and other assets, and advices or
notifications of any transfers of Foreign Securities to or from each
custodial account maintained by a Foreign Sub- Custodian for the
Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually
agreed upon, information concerning the Foreign Sub- Custodians
employed by the Custodian. Such information shall be similar in kind
and scope to that furnished to the Fund in connection with the Fund's
initial approval of such Foreign Sub-Custodians and, in any event,
shall include information pertaining to (i) the Foreign Custodians'
financial strength, general reputation and standing in the countries
in which they are located and their ability to provide the custodial
services required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and
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custody of securities not materially different form those prevailing
in the United States. The Custodian shall monitor the general
operating performance of each Foreign Sub- Custodian. The Custodian
agrees that it will use reasonable care in monitoring compliance by
each Foreign Sub-Custodian with the terms of the relevant Foreign
Sub-Custodian Agreement and that if it learns of any breach of such
Foreign Sub- Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will promptly
notify the Fund of such breach. The Custodian also agrees to use
reasonable and diligent efforts to enforce its rights under the
relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all
notices, reports or other written information received pertaining to
the Fund's Foreign Securities, including without limitation, notices
of corporate action, proxies and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the
account of any Series and delivery of securities maintained for the
account of such Series may be effected in accordance with the
customary or established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or
relating to any actions or omissions of any Foreign Sub-Custodian the
sole responsibility and liability of the Custodian shall be to take
appropriate action at the Fund's expense to recover such loss or
damage from the Foreign Sub-Custodian. It is expressly understood and
agreed that the Custodian's sole responsibility and liability shall
be limited to amounts so recovered from the Foreign Sub- Custodian.
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI
neither the Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or omission
to act or otherwise, either hereunder or under any Margin Account
Agreement, except for
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<PAGE>
any such loss or damage arising out of its own negligence or willful
misconduct. The Custodian agrees to indemnify and hold harmless the
Trust and Trust's Trustees and officers to the extent described above
(including reasonable counsel fees) incurred or assessed against any
of them as a result of any breach or violation of this Agreement by
the Custodian or its officers, employees and agents or its nominees,
resulting from their negligence or willful misconduct. The Custodian
may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion
of counsel to the Fund or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to anything done or
omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Fund for any loss or
damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful misconduct
on the part of the Custodian or any of its employees or agents.
Notwithstanding the foregoing, or any other provision contained in
this Agreement, in no event shall the Custodian be liable to the
Trust, its Trustees or officers, or any third party, for special,
indirect or consequential damages, or lost profits or loss of
business, arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and regardless
of the form of action.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not
be liable for:
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase,
sale or writing thereof, or the propriety of the amount paid or
received therefor;
(b) The legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any
dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that
any cash collateral delivered to it by a broker, dealer, or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the Fund
against any loss it
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<PAGE>
might sustain as a result of such loan. The Custodian specifically,
but not by way of limitation, shall not be under any duty or
obligation periodically to check or notify the Fund that the amount
of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer or
financial institution to which portfolio Securities of the Fund are
lent pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of
the Fund during the period of such loan or at the termination of such
loan, provided, however, that the Custodian shall promptly notify the
Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer, futures commission merchant or Clearing
Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such
broker, dealer, futures commission merchant or Clearing Member, to
see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount
the Fund is entitled to receive, or to notify the Fund of the
Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it
on behalf of the Fund until the Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or the
Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar matters
relating to Securities held in the Depository, unless the Custodian
shall have actually received timely notice from the Depository. In no
event shall the Custodian have any responsibility or liability for
the failure of the Depository to collect, or for the late collection
or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be
redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on
Securities held in the Depository the Custodian shall make a claim
against the Depository on behalf of the
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<PAGE>
Fund, except that the Custodian shall not be under any obligation to
appear in, prosecute or defend any action suit or proceeding in
respect to any Securities held by the Depository which in its opinion
may involve it in expense or liability, unless indemnity satisfactory
to it against all expense and liability be furnished as often as may
be required.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from
the Transfer Agent of the Fund nor to take any action to effect
payment or distribution by the Transfer Agent of the Fund of any
amount paid by the Custodian to the Transfer Agent of the Fund in
accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount if the Securities upon
which such amount is payable are in default, or if payment is refused
after due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking
institutions as Depository or Depositories, as Sub-Custodian or
Sub-Custodians, or as Co-Custodian or Co-Custodians including, but
not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms
and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Fund and the appointed
institution.
8. The Custodian shall not be under any duty or obligation (a)
to ascertain whether any Securities at any time delivered to, or held
by it or by any Foreign Sub-Custodian, for the account of the Fund
and specifically allocated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by
the Fund, whether or not involving the Custodian, are such
transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all out-of-pocket expenses and such
compensation as may be agreed upon from time to time between the
Custodian and the Fund. The Fund represents that the Administrator
has agreed to pay such compensation and ex- penses promptly upon
receipt of statements therefor, and hereby directs the Custodian to
(i) send all statements for compensation to its attention care of
Fund/Plan at the follow- ing address: Fund/Plan Services, Inc., 2 W.
Elm Street, Conshohocken, PA 19428, Attention: Mr. Elmer Gardner,
Senior
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<PAGE>
Vice President, and (ii) accept all payments made by Fund/Plan in the
Fund's name as if such payments were made directly by the Fund. The
Fund shall pay to Fund/Plan fees for services (including custodian
services provided by the Custodian) in accordance with the
Administration Agreement. The Custodian's compensation for services
rendered hereunder is set forth in a separate agreement between the
Custodian and Fund/Plan. Should Fund/Plan fail to pay or remit such
compensation to the Custodian within 20 days of the date the same is
due and payable, Custodian shall notify the Fund. If such payment or
remittance is not received from Fund/Plan within 15 days of such
notice, then the Custodian will be entitled to debit the Custody
Account directly for such compensation. The Custodian may charge
compensation with respect to which it has properly sent a notice to
the Fund, as provided in the preceding sentence, and any expenses
with respect to a Series incurred by the Custodian in the performance
of its duties pursuant to such agreement against any money
specifically allocated to such Series. Unless and until the Fund or
the Administrator instructs the Custodian by a Certificate to
apportion any loss, damage, liability or expense among the Series in
a specified manner, the Custodian shall also be entitled to charge
against any money held by it for the account of a Series such Series'
pro rata share (based on such Series net asset value at the time of
the charge to the aggregate net asset value of all Series at that
time) of the amount of any loss, damage, liability or expense,
including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. The expenses
for which the Custodian shall be entitled to reimbursement hereunder
shall include, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling outside of
New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any Oral
Instructions actually received by the Custodian. The Fund agrees to
forward or cause the Administrator to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in
such manner so that such Certificate or facsimile thereof is received
by the Custodian, whether by hand delivery, telecopier or other
similar device, or otherwise, by the close of business of the same
day that such Oral Instructions are given to the Custodian. The Fund
agrees that the fact that such confirming instructions are not
received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized
by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the
Custodian hereunder concerning such
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<PAGE>
transactions provided such instructions reasonably appear to have
been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably
believed by the Custodian to be given in accordance with the terms
and conditions of any Margin Account Agreement. Without limiting the
generality of the foregoing, the Custodian shall be under no duty to
inquire into, and shall not be liable for, the accuracy of any
statements or representations contained in any such instrument or
other notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in
the possession of the Custodian shall be the property of the Fund.
Such books and records shall be prepared and maintained as required
by the Investment Company Act of 1940, as amended, and other
applicable securities laws and rules and regulations. The Fund, or
the Fund's authorized representatives, shall have access to such
books and records during the Custodian's normal business hours. Upon
the reasonable request of the Fund, copies of any such books and
records shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the Custodian
its expenses of providing such copies. Upon reasonable request of the
Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or
are similarly maintained, and the Fund shall reimburse the Custodian
for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C., and with
such reports on its own systems of internal accounting control as the
Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of or in connection with this Agreement, including the
Custodian's payment or non-payment of checks pursuant to paragraph 6
of Article XIII as part of any check redemption privilege program of
the Fund, except for any such liability, claim, loss and demand
arising out of the Custodian's own negligence or willful misconduct.
For any legal proceeding giving rise to the indemnification set forth
above in this paragraph, the Fund shall be entitled to defend or
prosecute any claim in the name of the Custodian at its own expense
and through counsel of its own choosing
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<PAGE>
reasonably acceptable to the Custodian if it gives written notice to
the Custodian within ten (10) Business days of receiving notice of
such claim. Notwithstanding the foregoing, the Custodian may
participate in the litigation at its own expense and with counsel of
its own choosing.
15. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI the
Custodian may deliver and receive Securities, and receipts with
respect to such Securities, and arrange for payments to be made and
received by the Custodian in accordance with the customs prevailing
from time to time among brokers or dealers in such Securities. When
the Custodian is instructed to deliver Securities against payment,
delivery of such Securities and receipt of payment therefor may not
be completed simultaneously. The Fund assumes all responsibility and
liability for all credit risks involved in connection with the
Custodian's delivery of Securities pursuant to Certificates or
instructions of the Fund or the Administrator which responsibility
and liability shall continue until final payment in full has been
received by the Custodian.
16. In the event the Custodian is advised by the Fund that the
Fund is no longer utilizing the services of the Administrator, then
the Custodian shall furnish or give to the Fund the statements or
notices described above as to be furnished or given to the
Administrator.
17. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
Without limiting the generality of the foregoing, the Custodian shall
have no duties or responsibilities by reason of any terms or
provisions in the Administration Agreement, and if such
Administration Agreement shall cease to be in effect the Custodian
shall have no additional duties hereunder.
ARTICLE XVIII
TERMINATION
1. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than ninety (90) days after
the date of giving of such notice, provided, however, that if such
notice is sent by the Fund and recites that it is being given
contemporaneously with a termination of the Custody Administration
any Agency Agreement with Fund/Plan, such notice may specify any date
of termination selected by the Fund. In the event such notice is
given by the Fund, it shall be accompanied by a copy of a
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<PAGE>
resolution of the Board of Trustees of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk,
electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the
Custodian, the Fund shall, on or before the termination date, deliver
to the Custodian a copy of a resolution of the Board of Trustees of
the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor custodian
or custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a bank
or trust company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date
deliver directly to the successor custodian all Securities and moneys
then owned by the Fund and held by it as Custodian, after deducting
all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall
upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities
(other than Securities held in the Book-Entry System which cannot be
delivered to the Fund) and moneys then owned by the Fund be deemed to
be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry
System which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Officers of the Fund under its seal, setting forth the
names and the signatures of the present Officers. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the
event that any such present Officer ceases to be an Officer or in the
event that other or additional Officers are elected or appointed.
Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon
Oral Instructions or signatures of the present Officers as set forth
in the last delivered Certificate.
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<PAGE>
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90 Wash- ington Street, New York,
New York 10286, or at such other place as the Custodian may from time
to time designate in writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or delivered
to it at its office at the address for the Fund first above written,
or at such other place as the Fund may from time to time designate in
writing, and any notice or other instrument in writing authorized or
required to be given to the Administrator shall be sufficiently given
if addressed to the Administrator at such address as the
Administrator may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement and approved by a resolution of the Board
of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund, authorized or
approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of
a state or federal court situated in New York City, New York in
connection with any dispute arising hereunder and hereby waives its
right to trial by jury.
7. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto duly
authorized and their respective seals to be hereunto affixed, as of
the day and year first above written.
SAGE/TSO TRUST
[SEAL] By:_______________________
Attest:
-----------------------
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
-----------------------
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<PAGE>
APPENDIX A
I,______________________ , President and I, , of SAGE/TSO TRUST,
a Delaware business trust (the "Fund"), do hereby certify that:
The following individuals including officers and employees of
the Administrator have been duly authorized by the Board of Trustees
of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Certificates or Oral Instructions on behalf of the
Fund, and the signatures set forth opposite their respective names
are their true and correct signatures:
Name Signature
--------------------- -------------------------
<PAGE>
APPENDIX B
SERIES
<PAGE>
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, __________________________, hereby certifies
that he or she is the duly elected and acting _____________ of
SAGE/TSO TRUST, a Delaware business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on , 1996, at which a
quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of ____________________, 1996, (the "Custody
Agreement") is authorized and instructed on a continuous and
ongoing basis to deposit in the Book- Entry System, as defined
in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to
the extent possible in connection with its performance
thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
SAGE/TSO TRUST, as of the __ day of _____________________, 1996.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, _________________, hereby certifies that he or
she is the duly elected and acting _____________________ of SAGE/TSO
TRUST, a Delaware business trust (the "Fund"), and further certifies
that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on _________, 1996, at which a quorum
was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of ______________, 1996, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis
until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository,
as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Depository to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
SAGE/TSO TRUST, as of the __________ day of _________ , 1996.
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, _______________________ , hereby certifies that
he or she is the duly elected and acting ______________ of SAGE/TSO
TRUST, a Delaware business trust (the "Fund"), and further certifies
that the following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on _________, 1996, at which a quorum
was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of __________________, 1996, (the "Custody Agreement")
is authorized and instructed on a continuous and ongoing basis
until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the
Participants Trust Company as Depository, as defined in the
Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
SAGE/TSO TRUST, as of the ___ day of ___________________________ ,
1996.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, ________________________ , hereby certifies
that he or she is the duly elected and acting ____________________ of
SAGE/TSO TRUST, a Delaware business trust (the "Fund"), and further
certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on __________, 1996, at
which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of ___________________, 1996, (the "Custody Agreement")
is authorized and instructed on a continuous and ongoing basis
until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act
with respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in
the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
SAGE/TSO TRUST, as of the ____ day of ____________________ , 1996.
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, _______________________________ , hereby cer-
tifies that he or she is the duly elected and acting __________ of
SAGE/TSO TRUST, a Delaware business trust (the "Fund"), further
certifies that the following resolutions were adopted by the Board of
Trustees of the Fund at a meeting duly held on ________, 1996, at
which a quorum was at all times present and that such resolutions
have not been modified or rescinded and are in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
the Custody Agreement between The Bank of New York and the Fund dated
as of _______________, 1996 (the "Custody Agreement") is authorized
and instructed on a continuous and ongoing basis to act in accordance
with, and to rely on Certificates (as defined in the Custody
Agreement) given by to the Custodian by a Terminal Link (as defined
in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
us of such access codes only to Officers of the fund as defined in
the Custody Agreement, shall establish internal safekeeping
procedures to safeguard and protect the confidentiality and
availability of such access codes, shall limit its use of the
Terminal Link to those purposes permitted by the Custody Agreement,
shall require at least two such Officers to utilize their respective
access codes in connection with each such Certificate, and shall use
the Terminal Link only in a manner that does not contravene the
Investment Company Act of 1940, as amended, or the rules and
regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the
establishment of such access codes and such internal safekeep- ing
procedures, advise the Custodian that the same have been established
by delivering a Certificate, as defined in the Custody Agreement, and
the Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
SAGE/TSO TRUST, as of the ________ day of ______________________ ,
1996.
[SEAL]
<PAGE>
EXHIBIT E
The undersigned, _______________________ , hereby cer- tifies
that he or she is the duly elected and acting ________________ of
SAGE/TSO TRUST, a Delaware business trust (the "Fund"), further
certifies that the following resolutions were adopted by the Board of
Trustees of the Fund at a meeting duly held on ________, 1996, at
which a quorum was at all times present and that such resolutions
have not been modified or rescinded and are in full force and effect
as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each
country listed in Schedule I hereto be, and hereby is, approved by
the Board of Trustees as consistent with the best interests of the
Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the
foreign branches of The Bank of New York (the "Bank") listed in
Schedule I located in the countries specified therein, and with the
foreign sub-custodians and depositories listed in Schedule I located
in the countries specified therein be, and hereby is, approved by the
Board of Directors as consistent with the best interest of the Fund
and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to this
meeting between the Bank and each of the foreign sub-custodians and
depositories listed in Schedule I providing for the maintenance of
the Fund's assets with the applicable entity, be and hereby are,
approved by the Board of Trustees as consistent with the best
interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby
authorized to place assets of the Fund with the afore-mentioned
foreign branches and foreign sub-custodians and depositories as
hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of
them, are authorized to do any and all other acts, in the name of the
Fund and on its behalf, as they, or any of them, may determine to be
necessary or desirable and proper in connection with or in
furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
SAGE/TSO TRUST, as of the ___ day of ________________ , 1996.
[SEAL]
<PAGE>
EXHIBIT 99.B8b
Page 1 of 6 pages.
<PAGE>
CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This Agreement, dated as of the day of , 1996 made by and
between Sage/Tso Trust, a business trust (the "Trust") operating as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "B" attached
hereto, and which Schedule "B" may be amended from time to time by mutual
agreement of the Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby
Fund/Plan will provide certain certain custody administration services on behalf
of the Trust on the terms and conditions set forth in this Agreement; and
WHEREAS, the Trust desires that Fund/Plan act as its agent for the
specific purpose of taking receipt of, and making payment for, custody services
performed on the Trust's behalf by The Bank of New York pursuant to an agreement
between The Bank of New York and the Trust; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for good and valuable consideration, the receipt and
sufficiency is hereby acknowledged, the Parties hereto, intending to be legally
bound, do hereby agree as follows:
APPOINTMENT OF FUND/PLAN AS AGENT
Section 1. The Trust hereby appoints Fund/Plan as an agent of the
Trust, and Fund/Plan hereby accepts such appointment, for the limited purpose
of: (i) accepting invoices charged to the Trust for custody services performed
by The Bank of New York on the Trust's behalf, and (ii) remitting payment to The
Bank of New York for such services performed in amounts as set forth in Schedule
"A" attached hereto.
Section 2. As Custody Administrator, Fund/Plan shall:
Page 2 of 6 pages.
<PAGE>
a) coordinate and process portfolio trades through terminal links
with The Bank of New York.
b) input and verify portfolio trades
c) monitor pending and failed security trades
d) coordinate communications between brokers and banks to resolve
any operational problems
e) advise the Trust of any corporate action information, address
and follow up on any dividend or interest discrepancies
f) process the Trust's expenses
g) interface with the accounting services provider and the
transfer agent to research and resolve custody cash problems
h) provide daily and monthly reports
TERM AND FEES
Section 3.
---------
(a) The term of this Agreement shall be for a period of two (2)
years commencing on the date which the Trust's registration
statement is declared effective by the U.S. Securities and
Exchange Commission ("Effective Date") and shall continue
thereafter on a year to year term subject to termination by
either Party as set forth below.
(b) After the initial term of this Agreement, the Trust or
Fund/Plan may give written notice to the other of the
termination of this Agreement, such termination to take effect
at the time specified in the notice, which date shall not be
less than one hundred and eighty (180) days after the date of
receipt of such notice. Upon the effective termination date,
the Trust shall pay to Fund/Plan such compensation as may be
due as of the date of termination and shall likewise reimburse
Fund/Plan for any out-of-pocket expenses and disbursements
reasonably incurred by Fund/Plan to such date.
(c) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the
Trust by written notice to Fund/Plan in connection with the
termination of this Agreement, Fund/Plan shall promptly upon
such termination and at the expense of the Trust, transfer all
records belonging to the Trust and shall cooperate in the
transfer of such records, duties and responsibilities.
(d) The Trust agrees to pay Fund/Plan compensation for its
services and to
Page 3 of 6 pages.
<PAGE>
reimburse it for expenses at the rates and amounts as set forth in Schedule "A"
attached hereto, and as shall be set forth in any amendments to such Schedule
"A" approved by the Trust and Fund/Plan. The Trust agrees and understands that
Fund/Plan's compensation be comprised of two components, payable on a monthly
basis, as follows:
(i) a fixed fee for each Series, together with an asset based
fee which the Trust hereby authorizes Fund/Plan to collect by debiting the
Trust's custody account for invoices which are rendered for the services
performed for the applicable function. The invoices for the services performed
will be sent to the Trust after such debiting with the indication that payment
has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by
Fund/Plan on behalf of the Trust, which out-of-pocket expenses will be billed to
the Trust within the first ten calendar days of the month following the month in
which such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
a Series' net assets shall be computed at the times and in the manner specified
in the Trust's Prospectus and Statement of Additional Information then in
effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those stated, a written amendment to this Agreement
specifying the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
Section 4.
---------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, director, employee or
agent of the Trust, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with Fund/Plan's duties under the Agreement),
Page 4 of 6 pages.
<PAGE>
to be rendering such services to or acting solely for the Trust and not as a
director, officer, employee, shareholder or agent of, or under the control or
direction of Fund/Plan even though such person may receive compensation from
Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and signed, countersigned or executed by any duly
authorized person, upon the oral or written instruction of an authorized person
of the Trust or upon the opinion of legal counsel to the Trust; or (iii) any
action taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or interpretation
of the same even though the same may thereafter have been altered, changed,
amended or repealed. Indemnification under this subparagraph shall not apply,
however, to actions or omissions of Fund/Plan or its directors, officers,
employees, shareholders or agents in cases of its or their willful misfeasance,
bad faith, gross negligence or reckless disregard of its or their duties
hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 4(c) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the defense
of any action, suit or proceeding in which Fund/Plan is involved and for which
indemnity is being provided by the Trust to Fund/Plan. The Trust may negotiate
the settlement of any action, suit or
Page 5 of 6 pages.
<PAGE>
proceeding subject to Fund/Plan's approval, which shall not be unreasonably
withheld. Fund/Plan shall have the right, but not the obligation, to participate
in the defense or settlement of a claim or action, with its own counsel, but any
costs or expenses incurred by Fund/Plan in connection with, or as a result of,
such participation will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of an
action or proceeding and to retain its own counsel, and the reasonable fees and
expenses of such counsel shall be borne by the Trust (which shall pay such fees,
costs and expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel stating that
the use of counsel chosen by the Trust to represent Fund/Plan would present such
counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both Fund/Plan and the Trust, and legal counsel to Fund/Plan
shall have reasonably concluded that there are legal defenses available to it
which are different from or additional to those available to the Trust or which
may be adverse to or inconsistent with defenses available to the Trust (in which
case the Trust shall not have the right to direct the defense of such action on
behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ separate
counsel at the expense of the Trust. Notwithstanding anything to the contrary
herein, it is understood that the Trust shall not, in connection with any
action, suit or proceeding or related action, suit or proceeding, be liable
under this Agreement for the fees and expenses of more than one firm.
(d) The terms of this Section 4 shall survive the termination of
this Agreement.
Section 5. This Agreement may be amended from time to time by a
supplemental agreement executed by the Trust and Fund/Plan.
Section 6. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid, to the respective parties as follows:
If to the Trust: Fund/Plan:
--------------- ----------
Sage/Tso Trust Fund/Plan Services, Inc.
7799 Leesburg Pike, Suite 900 2 West Elm Street
Falls Church, VA 22043 Conshohocken, PA 19428
Attention: James C. Tso, President Attention: Kenneth J. Kempf, President
Page 6 of 6 pages.
<PAGE>
Section 7. The Trust represents and warrants to Fund/Plan that the
execution and delivery of this Agreement by the undersigned officers of the
Trust has been duly and validly authorized by resolution of the Board of
Directors of the Trust.
Section 8. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 9. This Agreement shall extend to and shall be binding upon the
Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of their respective Board of Trustees.
Section 10. This Agreement shall be governed by the laws of the
Commonwealth of Virginia and the venue of any action arising under this
Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 11. No provision of this Agreement may be amended or modified,
in any manner except in writing, properly authorized and executed by Fund/Plan
and the Trust.
Section 12. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid provided that the basic Agreement is not thereby
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement,
consisting in its entirety of six typewritten pages, together with Schedules "A"
and "B" to be signed by their duly authorized officers, as of the day and year
first above written.
Sage/Tso Trust Fund/Plan Services, Inc.
- -------------- ------------------------
/s/ James C. Tso /s/ Kenneth J. Kempf
----------------------- ---------------------------
By: James C. Tso, President By: Kenneth J. Kempf, President
Page 7 of 6 pages.
<PAGE>
SCHEDULE "A"
============
CUSTODY AGENCY AND ADMINISTRATION FEE SCHEDULE
FOR
SAGE/TSO TRUST
I. Domestic Securities and ADRs: (1/12th payable monthly)
----------------------------
.0002 On the First $ 50 Million of Average Net Assets
.00015 On the Next $150 Million of Average Net Assets
.000125 Over $200 Million of Average Net Assets
Minimum monthly fee is $500 per separate series of shares.
II. Custody Domestic Securities Transactions Charge: (billed monthly)
-----------------------------------------------
Book Entry DTC, Federal Book Entry, PTC $12.00
Physical Securities, Physical GNMA's $20.00
RIC's $24.50
P & I Paydowns $ 7.00
Options/Futures $20.00
Savings Account $ 3.00
Wires $ 7.00
Check Request $ 6.00
A transaction includes buys, sells, maturities or free security
movements.
III. Custody of Foreign Securities Per Global Portfolio
--------------------------------------------------
(Bank of New York Custody Schedule)
=======================================================================
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS)
-----------------------------------------------------------------------
Argentina 22 75
-----------------------------------------------------------------------
Australia 5 65
-----------------------------------------------------------------------
Austria 6 90
-----------------------------------------------------------------------
Bangladesh 50 180
-----------------------------------------------------------------------
Belgium (reg bds) 3.5 80
-----------------------------------------------------------------------
Belgium (equities and Cpn bds) 6 80
-----------------------------------------------------------------------
Brazil 35 40
-----------------------------------------------------------------------
Canada 3 20
-----------------------------------------------------------------------
Chile 35 65
-----------------------------------------------------------------------
China 35 65
-----------------------------------------------------------------------
Schedule "A"; Page 1
<PAGE>
============================================================================
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS)
----------------------------------------------------------------------------
Colombia 55 165
----------------------------------------------------------------------------
Czech Republic 28 65
----------------------------------------------------------------------------
Denmark 4 110
----------------------------------------------------------------------------
Euromarket 4 20
----------------------------------------------------------------------------
Finland 16 75
----------------------------------------------------------------------------
France 5 75
----------------------------------------------------------------------------
Germany 3 40
----------------------------------------------------------------------------
Greece 35 150
----------------------------------------------------------------------------
Hong Kong 13 95
----------------------------------------------------------------------------
Hungary 70 205
----------------------------------------------------------------------------
India 55 180**
----------------------------------------------------------------------------
Indonesia 15 145
----------------------------------------------------------------------------
Ireland 4.5 55
----------------------------------------------------------------------------
Israel 80 60
----------------------------------------------------------------------------
Italy 5 95
----------------------------------------------------------------------------
Japan (bonds) 5 15
----------------------------------------------------------------------------
Japan (equities) 4 1
----------------------------------------------------------------------------
Luxembourg 9.50 85
----------------------------------------------------------------------------
Malaysia 15 145
----------------------------------------------------------------------------
Mexico 15 30
----------------------------------------------------------------------------
Morocco 40 115
----------------------------------------------------------------------------
Netherlands 8 17
----------------------------------------------------------------------------
New Zealand 4.5 90
----------------------------------------------------------------------------
Norway 4 90
----------------------------------------------------------------------------
Pakistan 45 170
----------------------------------------------------------------------------
Peru 80 195
----------------------------------------------------------------------------
Philippines 16.50 145
----------------------------------------------------------------------------
Poland 60 155
----------------------------------------------------------------------------
Portugal 35 145
----------------------------------------------------------------------------
Singapore 12 105
----------------------------------------------------------------------------
South Africa 3 40
----------------------------------------------------------------------------
South Korea 16 30
----------------------------------------------------------------------------
Schedule "A"; Page 2
<PAGE>
===========================================================================
Countries *Safekeeping Charges Transaction Fee
(BASIS POINTS)
---------------------------------------------------------------------------
Spain 6 55
---------------------------------------------------------------------------
Sri Lanka 24 75
---------------------------------------------------------------------------
Sweden 4 65
---------------------------------------------------------------------------
Switzerland 4 105
---------------------------------------------------------------------------
Taiwan 21 140
---------------------------------------------------------------------------
Thailand 6 50
---------------------------------------------------------------------------
Turkey 35 105
---------------------------------------------------------------------------
United Kingdom 4 40
---------------------------------------------------------------------------
United Kingdom (gilts) 5 55
---------------------------------------------------------------------------
Uruguay (Equities) 65 90
---------------------------------------------------------------------------
Uruguay (bonds) 45 90
---------------------------------------------------------------------------
Venezuela 55 180
===========================================================================
* Fee expressed in basis points per annum is calculated based upon
month-end market value.
** Transaction charge is per 10,000 shares or part thereof.
A transaction includes buys, sells, maturities or Free Security movements.
Minimum monthly fee for use of our Global Network
----------------------------------------------------
$500 per portfolio.
Minimum charges imposed by Agent Banks/Local Administrators
--------------------------------------------------------------
Chile - USD 5,000 per annum.
Columbia - USD 600 per month. Peru - USD 6,000 per annum per
account.
Brazil - USD 15 basis points for annual administrative charge.
Taiwan - USD 3,000 account opening charge.
IV. When Issued, Securities Lending, Index Futures
----------------------------------------------
Should any of these investment vehicles require a separate
segregated custody account, a fee of $250 per account per
month will apply.
V. Custody Miscellaneous Fees
--------------------------
Administrative fees incurred in certain local markets will be
passed onto the customer with a detailed description of the
fees. Fees include income collection, corporate action
handling, funds transfer, special local taxes, stamp
Schedule "A"; Page 3
<PAGE>
duties, registration fees, messenger and courier services and
other out-of-pocket expenses.
VI. Additional Services
-------------------
To the extent the Trust commences using investment techniques
such as Security Lending, Short Sales, Interest Rate Swaps,
Futures, Leveraging, Precious Metals and foreign securities,
additional fees will apply.
Activities of a non-recurring nature such as fund
consolidations, mergers, or reorganizations will be subject to
negotiation. Any enhanced services, programming requests or
reports will be quoted upon request.
Schedule "A"; Page 4
<PAGE>
SCHEDULE "B"
============
Identification of Series
------------------------
Below are listed the Series to which services under this Agreement are to be
performed as of the Execution Date of this Agreement:
"Sage/Tso Trust"
1. America Asia Allocation Growth Fund - Class A Shares
2. America Asia Allocation Growth Fund - Class D Shares
This Schedule "B" may be amended from time to time by agreement of the Parties.
Schedule "B"; Page 1
<PAGE>
EXHIBIT 99.9a
<PAGE>
TRANSFER AGENT SERVICES AGREEMENT
This Agreement, dated as of the day of , 1996, made by and between
Sage/Tso Trust, a business trust (the "Trust") operating as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to retain Fund/Plan to perform share
transfer agency, redemption and dividend disbursing services as set forth in
this Agreement and in Schedule "A" attached hereto, and to perform certain other
functions in connection with these duties; and
WHEREAS, Fund/Plan is registered with the Securities and Exchange
Commission as a Transfer Agent as required under Section 17A(c) of the
Securities Exchange Act of 1934, as amended; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions upon the terms and conditions set forth below; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the meanings
herein specified unless the context otherwise requires.
Shareholders shall mean the registered owners of the shares of the
Series in accordance with the share registry records maintained by Fund/Plan for
the Trust.
Shares shall mean the issued and outstanding shares of the Series.
1
<PAGE>
Signature Guarantee shall mean the guarantee of signatures by an
"eligible guarantor institution" as defined in rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended. Eligible guarantor institutions include banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. Broker-
dealers guaranteeing signatures must be members of a clearing corporation or
maintain net capital of at least $100,000. Signature guarantees will be accepted
from any eligible guarantor institution which participates in a signature
guarantee program.
Oral Instruction shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to Fund/Plan in
person or by telephone, telegram, telecopy or other mechanical or documentary
means lacking original signature, by a person or persons reasonably identified
to Fund/Plan to be a person or persons so authorized by a resolution of the
Board of Trustees of the Trust.
Written Instruction shall mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Fund/Plan in an
original writing containing an original signature or a copy of such document
transmitted by telecopy including transmission of such signature reasonably
identified to Fund/Plan to be the signature of a person or persons so authorized
by a resolution of the Board of Trustees of the Trust to give Written
Instructions to Fund/Plan.
TRANSFER AGENCY SERVICES
Section 2. Fund/Plan shall make original issues of Shares in accordance
with this Agreement and with the Trust's Prospectus and Statement of Additional
Information then in effect, upon the written request of the Trust, and upon
being furnished with (i) a certified copy of a resolution or resolutions of the
Board of Trustees of the Trust authorizing such issue; (ii) an opinion of
counsel as to the validity of such Shares; and (iii) necessary funds for the
payment of any original issue tax applicable to such Shares.
Section 3. Transfers of Shares shall be registered and new Shares
issued by Fund/Plan upon redemption of outstanding Shares, (i) in the form
deemed by Fund/Plan to be properly endorsed for transfer, (ii) with all
necessary endorser's signatures guaranteed pursuant to Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, and accompanied by, (iii) such
assurances as Fund/Plan shall deem necessary or appropriate to evidence the
genuineness and effectiveness of each necessary endorsement, and (iv)
satisfactory evidence of compliance
2
<PAGE>
with all applicable laws relating to the payment or collection of taxes.
Section 4. In registering transfers, Fund/Plan may rely upon the
applicable commercial code or any other applicable law which, in the written
opinion of counsel (a copy of which shall previously have been furnished to the
Trust), protect Fund/Plan and the Trust in not requiring complete documentation,
in registering transfer without inquiry into adverse claims, in delaying
registration for purposes of such inquiry, or in refusing registration where in
its judgment an adverse claim requires such refusal.
Section 5. With respect to confirmed trades received by Fund/Plan from
a registered representative of an NASD member, Fund/Plan shall periodically
notify the Trust of the current status of outstanding confirmed trades.
Fund/Plan is authorized to cancel confirmed trades which have been outstanding
for thirty (30) days. Upon such cancellation, Fund/Plan shall instruct the
accounting agent to adjust the books of the Trust accordingly. Fund/Plan will
not accept telephone purchases directly from shareholders.
Section 6. Fund/Plan will maintain stock registry records in the usual
form in which it will note the issuance, transfer and redemption of Shares.
Fund/Plan is responsible to provide reports of Share purchases, redemptions, and
total Shares outstanding on the next business day after each net asset
valuation. Fund/Plan is authorized to keep records, which will be part of the
stock transfer records, in which it will note the names and registered address
of Shareholders and the number of Shares and fractions thereof owned by them.
Section 7. In addition to the duties and functions above-mentioned,
Fund/Plan will perform the usual duties and functions of a stock transfer agent
for an investment company as listed in Schedule "A" attached hereto. Fund/Plan
may rely conclusively and act without further investigation upon any list,
instruction, certification, authorization or other instrument or paper
reasonably believed by Fund/Plan in good faith, to be genuine and unaltered, and
to have been signed, countersigned, or executed by duly authorized person or
persons, or upon the instructions of any officer of the Trust, or upon the
advice of counsel for the Trust or for Fund/Plan. Fund/Plan may record any
transfer of Shares which it reasonably believes to have been duly authorized or
may refuse to record any transfer of Shares if in good faith Fund/Plan deems
such refusal necessary in order to avoid any liability either of the Trust or
Fund/Plan. The Trust agrees to indemnify and hold harmless Fund/Plan from and
against any and all losses, costs, claims, and liability which it may suffer or
incur by reason of such reliance or
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acting or refusing to act. Fund/Plan shall maintain and reconcile all operating
bank accounts necessary to facilitate all transfer agency processes; including,
but not limited to, distribution disbursements, redemptions and payment
clearance accounts.
Section 8. In the event of any request or demand for the inspection of
the Share records of the Series is received, Fund/Plan shall use its best
efforts to notify the Trust and to secure instructions as to permitting or
refusing such inspection. Fund/Plan may, however, exhibit such records to any
person in any case where it is advised by its counsel that it may be held liable
for failure to do so.
ISSUANCE OF SHARES
Section 9. Prior to the daily determination of net asset value in
accordance with the Series' Prospectus and Statement of Additional Information,
Fund/Plan shall process all purchase orders received since the last
determination of the Series' net asset value.
Fund/Plan shall calculate daily the amount available for investment in
Shares at the net asset value determined by the Series' pricing agent as of the
close of regular trading on the New York Stock Exchange, the number of Shares
and fractional Shares to be purchased and the net asset value to be deposited
with the Trust's custodian bank (the "Custodian"). Fund/Plan shall place a
purchase order daily with the appropriate Series for the proper number of Shares
and fractional Shares to be purchased and confirm such number to the Trust, in
writing.
Section 10. Share certificates will not be issued in conjunction with
the sale of Shares.
Section 11. Fund/Plan, having made the calculations provided for above,
shall thereupon pay over the net asset value of Shares purchased to the
Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder Registration Records.
The Shares and fractional Shares purchased for each Shareholder will be credited
by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to
each Shareholder a confirmation of each purchase, with copies to the Trust, if
requested. Such confirmations will show the prior Share balance, the new Share
balance, the amount invested and the price paid for the newly purchased Shares.
REDEMPTIONS
Section 12. Fund/Plan shall, prior to the daily determination of net
asset value in accordance with the Series' Prospectus and Statement of
Additional Information, process all
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requests from Shareholders to redeem Shares and determine the number of Shares
required to be redeemed to make monthly payments, automatic payments or the
like. Thereupon, Fund/Plan shall advise the Trust of the total number of Shares
available for redemption and the number of Shares and fractional Shares
requested to be redeemed. Fund/Plan shall furnish the Trust with an appropriate
confirmation of the redemption and process the redemption by filing with the
Custodian an appropriate statement and make the proper distribution and
application of the redemption proceeds in accordance with the Series' Prospectus
and Statement of Additional Information then in effect. The stock registry books
recording outstanding Shares, the shareholder registration records and the
individual account of the Shareholder shall be properly debited.
Section 13. The proceeds of redemption shall be remitted by Fund/Plan
by check mailed to the Shareholder at the Shareholder's registered address or
wired to an authorized bank account in accordance with the Series' Prospectus
and Statement of Additional Information then in effect.
For the purposes of redemption of Shares which have been purchased
within 15 days of a redemption request, the Trust shall provide Fund/Plan, from
time to time, with Written Instructions concerning the time within which such
requests may be honored.
DIVIDENDS
Section 14. The Trust shall notify Fund/Plan of the date of each
dividend declaration or capital gains distribution. In addition, the Trust shall
provide to Fund/Plan five business days' prior written notice of the record date
for determining the Shareholders entitled to payment. The per-share payment
amount of any dividend or capital gain shall be determined by the Trust and
communicated to Fund/Plan.
Section 15. On or before each payment date, the Trust will notify
Fund/Plan of the total amount of the dividend or distribution currently payable.
Fund/Plan will, on the designated payment date, automatically reinvest all
dividends in additional Shares except in cases where Shareholders have elected
to receive distribution in cash, in which case Fund/Plan will mail distribution
checks to the Shareholders for the proper amounts payable to them from monies
transferred by the Custodian to Fund/Plan for that purpose.
FEES
Section 16. The Trust agrees to pay Fund/Plan compensation for its
services and to
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reimburse it for expenses, at the rates and amounts as set forth in Schedule "B"
attached hereto, and as shall be set forth in any amendments to such Schedule
"B" approved by the Trust and Fund/Plan. The Trust agrees and understands that
Fund/Plan's compensation will be comprised of two components, payable on a
monthly basis, as follows:
(i) an annual shareholder Account Maintenance Fee
calculated by multiplying the monthly average number of accounts for Class A
Shares and Class D Shares of the Trust by one twelfth (1/12th) the respective
account fee as stated in Schedule "B", subject to a minimum fee per class, which
the Trust hereby authorizes Fund/Plan to collect by debiting the Trust's custody
account for invoices which are rendered for the services performed for the
applicable function. The invoices for the services performed will be sent to the
Trust after such debiting with the indication that payment has been made; and
(ii) reimbursement of any reasonable out-of-pocket
expenses paid by Fund/Plan on behalf of the Trust, which out-of-pocket expenses
will be billed to the Trust within the first ten calendar days of the month
following the month in which such out-of-pocket expenses were incurred. The
Trust agrees to reimburse Fund/Plan for such expenses within ten calendar days
of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
the Series' net assets shall be computed at the times and in the manner
specified in the Series' Prospectus and Statement of Additional Information then
in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
GENERAL PROVISIONS
Section 17. Fund/Plan shall maintain records (which may be part of the
stock transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend reinvestments, in which
will be noted the transactions effected for each Shareholder and the number of
Shares and fractional Shares owned by each Shareholder. Fund/Plan agrees to make
available upon request and to preserve for the periods prescribed in Rule 31a-2
under the Act, any records relating to services provided under this Agreement
which are required to be maintained by Rule 31a-1 under the Act.
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Section 18. In addition to the services as Transfer Agent and dividend
disbursing agent set forth above, Fund/Plan may perform other services for the
Trust as agreed upon from time to time, including but not limited to,
preparation of and mailing Federal Tax Information Forms and mailing semi-annual
reports to shareholders of the Trust.
Section 19. Nothing contained in this Agreement is intended to or shall
require Fund/Plan in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next business day on which
the New York Stock Exchange is open.
Section 20. Limitation of Liability
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, director, employee or
agent of the Trust, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or under the control or direction of
Fund/Plan even though such person may receive compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and signed, countersigned or executed by any duly
authorized person, upon the oral or written
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instruction of an authorized person of the Trust or upon the opinion of legal
counsel to the Trust; or (iii) any action taken in good faith or omitted to be
taken by Fund/Plan in connection with its appointment in reliance upon any law,
act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed. Indemnification
under this subparagraph shall not apply, however, to actions or omissions of
Fund/Plan or its directors, officers, employees, shareholders or agents in cases
of its or their willful misfeasance, bad faith, gross negligence or reckless
disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 20(c) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the defense
of any action, suit or proceeding in which Fund/Plan is involved and for which
indemnity is being provided by the Trust to Fund/Plan. The Trust shall may
negotiate the settlement of any action, suit or proceeding subject to
Fund/Plan's approval, which shall not be unreasonably withheld. Fund/Plan shall
have the right, but not the obligation, to participate in the defense or
settlement of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such participation
will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of an
action or proceeding and to retain its own counsel, and the reasonable fees and
expenses of such counsel shall be borne by the Trust (which shall pay such fees,
costs and expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the Trust to represent Fund/Plan would
present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding
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include both Fund/Plan and the Trust, and legal counsel to Fund/Plan shall have
reasonably concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust shall not have the right to direct the defense of such action on
behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding anything to the
contrary herein, it is understood that the Trust shall not, in connection with
any action, suit or proceeding or related action, suit or proceeding, be liable
under this Agreement for the fees and expenses of more than one firm.
(d) The terms of this Section 20 shall survive the termination of this
Agreement.
Section 21. Fund/Plan is authorized, upon receipt of Written
Instructions from the Trust, to make payment upon redemption of Shares without a
signature guarantee. The Trust hereby agrees to indemnify and hold Fund/Plan,
its successors and assigns, harmless of and from any and all expenses, damages,
claims, suits, liabilities, actions, demands, losses whatsoever arising out of
or in connection with a payment by Fund/Plan upon redemption of Shares pursuant
to Written Instructions and without a signature guarantee.
Section 22.
(a) The term of this Agreement shall be for a period of two
(2) years, commencing on the date which the Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission ("Effective
Date") and shall continue thereafter on a year to year term subject to
termination by either Party as set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall
be fixed for two (2) years commencing on the Effective Date of this Agreement
and shall continue thereafter subject to review and adjustment as determined by
the Parties.
(c) After the initial term of this Agreement, the Trust or
Fund/Plan may give written notice to the other of the termination of this
Agreement, such termination to take effect at the time specified in the notice,
which date shall not be less than one hundred eighty (180) days after the date
of receipt of such notice. Upon the effective termination date, the Trust shall
pay to Fund/Plan such compensation as may be due as of the date of termination
and shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements
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reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Fund/Plan in connection with the termination of this Agreement,
Fund/Plan shall promptly, upon such termination and at the expense of the Trust,
transfer all required records which are the property of the Trust and shall
cooperate in the transfer of such records, and its duties and responsibilities
under the Agreement.
Section 23. The Trust shall file with Fund/Plan a certified copy of
each resolution of its Board of Trustees authorizing the execution of Written
Instructions or the transmittal of Oral Instructions, as provided in Section 1
of this Agreement.
Section 24. This Agreement may be amended from time to time by a
supplemental agreement executed by the Trust and Fund/Plan.
Section 25. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid, to the respective parties as follows:
If to the Trust: If to Fund/Plan:
- ---------------- ----------------
Sage/Tso Investment Management L.P. Fund/Plan Services, Inc.
7799 Leesburg Pike, Suite 900 2 West Elm Street
Falls Church, Virginia 22043 Conshohocken, PA 19428
Attention: James C. Tso, President Attention: Kenneth J. Kempf, President
Section 26. Authority of Signatories The Parties represent and warrant
to each other that the execution and delivery of this Agreement by the
undersigned officer of each Party has been duly and validly authorized; and,
when duly executed, this Agreement will constitute a valid and legally binding
enforceable obligation of each Party. The obligations under this Agreement shall
be binding upon the assets and property of the Trust and shall not be binding
upon any officer or shareholder of the Series individually.
Section 27. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
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Section 28. This Agreement shall extend to and shall be binding upon
the Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of their respective Boards of Directors
or Trustees.
Section 29. This Agreement shall be governed by the laws of the
Commonwealth of Virginia and the exclusive venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 30. No provision of this Agreement may be amended or modified,
in any manner except in writing, properly authorized and executed by Fund/Plan
and the Trust.
Section 31. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid, provided that the basic agreement is not thereby
substantially impaired.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting in its entirety, of eleven typewritten pages, together with Schedules
"A," "B" and "C," to be signed by their duly authorized officers as of the day
and year first above written.
Sage/Tso Trust Fund/Plan Services, Inc.
- -------------- -----------------------
/s/ James C. Tso /s/ Kenneth J. Kempf
--------------------------- ------------------------------
By: James C. Tso, Esq., President By: Kenneth J. Kempf, President
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SCHEDULE "A"
------------
TRANSFER AGENT/SHAREHOLDER SERVICES
FOR
SAGE/TSO TRUST
The following is a list of Services to be provided under this Agreement:
I. - Shareholder File
1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and NSCC - FundSERV - Networking
transmissions.
2. Create Customer Information File (CIF) to link accounts within the
Trust and across funds within the Trust. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality control of new account information including
verification of initial investment.
*4. Systematic linkage of shareholder accounts with exact matches on
social security number and address for the purpose of consolidated
account history reporting. Periodic production of laser printed
combined statements.
*5. Production of household mailing labels which enable the Trust to do
special mailings to each address in the Trust Group rather than each
account.
6. Maintain account and customer file records, based on shareholder
request and routine quality review.
7. Maintain tax ID certification and NRA records for each account,
including backup withholding.
8. Provide written confirmation of address changes.
9. Produce shareholder statements for daily activity, dividends,
on-request, third party and periodic mailings.
*10. Produce shareholder lists, labels and ad hoc reports to Trust
management as requested.
11. Establish and maintain dealer file by fund group, including dealer,
branch, representative number and name.
12. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
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13. Image all applications, account documents, data changes,
correspondence, monetary transactions, and other pertinent
shareholder documents.
II. - Shareholder Services
1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research and
correspondence representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges systematic withdraws, pre-authorized drafts, FundSERV and
wire order trades, problem solving and process telephone
transactions.
*3. Customized recording of fund prices daily after regular business
hours for shareholder access.
4. Silent monitoring of telephone representative calls by the phone
supervisor during live conversations to ensure exceptional customer
service.
5. Record and maintain tape recordings of all shareholder calls for a
six month period.
6. Phone Supervisor produces daily management reports of shareholder
calls which include tracking volumes, call lengths, average wait time
and abandoned call rates to ensure quality service.
7. Provide quality assurance of phone routing by the unit Assistant
Phone Supervisor through verification of the Rolm in house computer
terminal linkage.
8. Phone representatives are throughly trained through in house training
programs on the techniques of providing Exceptional Customer Service.
9. Customer inquiries received by letter or telephone are researched by
a correspondence team with an average tenure of 15 years. These
inquiries include such items as, account/customer file information,
complete historical account information, stop payments on checks and
transaction details.
10. Provide written correspondence in response to shareholder inquiries
and request through the Fox Pro letter writing system and our in
house letter processing programs. Provide written requests for
informational purposes (e.g., received unclear shareholder
instructions). Whenever possible, unclear shareholder instructional
letters are handled by a phone call to the shareholder from our phone
representatives to avoid delay in processing of the request.
A-2
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III. - Investment Processing
1. Establish and maintain Rights of Accumulation and Letter of Intent
files.
2. Initial investment (checks or Fed wires).
3. Subsequent investments (checks or Fed wires) processed through lock
box.
4. Pre-authorized investments (PAD) through ACH system.
5. Government allotments through ACH system.
*6. Wire order and NSCC - Fund/SERV trades.
7. Prepare and process daily bank deposit of shareholder investments.
IV. - Redemption Processing
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis.
4. Issue checkbooks and process checkbook redemption through agent bank.
*5. Provide wire order and NSCC - Fund/SERV trade processing.
6. Redemption proceeds distributed to shareholder by check, Fed wire or
ACH processing.
V. - Exchange & Transfer Processing
1. Process legal transfers.
2. Process ACATS transfers.
3. Process exchange transactions (letter and telephone requests).
VI. - Retirement Plans
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
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e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRAs and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
VII. - Commission Processing
1. Settlement and payment of dealer commissions on the 10th and 25th of
each month for front end load funds. Dealer checks are sent to the
main branch only.
2. Settlement and payment of Distributor/Underwriter fees on the 10th
and 25th of each month for front end load funds.
3. Settlement and payment of CDSC fees on the 1st of each month for back
end load funds.
VIII. - Settlement & Control
1. Daily review of processed shareholder transactions to assure input
was processed correctly. Accurate trade activity figures passed to
Trust's accounting agent by 11:00am EST.
2. Preparation of daily cash movement sheets to be passed to Trust's
accounting agent and custodian bank by 10:00am EST for use in
determining the Trust's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Trust.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments including the proper notification of
any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of the Trust's declared dividends and capital
gains to include
A-4
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the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rate used and the
NAV price of reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Trust's accounting agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement sheets for the cash portion of the
dividend payout on payable date.
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all Fund/Plan clients. Monthly deposits to
the IRS of all taxes withheld from shareholder disbursements,
distributions and foreign account distributions. Correspond with the
IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV activity.
IX. - Year End Processing
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid Tax IDs. This includes initiating 31%
backup withholding and notifying shareholders of their tax status and
the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year end activity with client. Activities include
producing year end statements, scheduling record dates for year end
dividends and capital gains, production of combined statements and
printing of inserts to be mailed with tax forms.
6. Prepare Tax year-end confirmation letter for Trust approval regarding
all distributions made throughout year. Dates and rates must be
confirmed by the Trust so that they can be used for reporting to the
IRS.
A-6
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7. Coordinate the ordering of form stock envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes allocate space
for storage.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year end statements and tax forms.
9. Match and settle tax reporting totals to fund records and on-line
data from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.
12. Prepare IRS magnetic tapes and appropriate forms for the filing of
all reportable activity to the Internal Revenue Service.
X. - Client Services
1. An Account Manager is assigned to each relationship. The Account
Manager acts as the liaison between the Trust and the Transfer Agency
staff. Responsibilities include scheduling of events, system
enhancement implementation, special promotion/event implementation
and follow-up, and constant Trust interaction on daily operational
issues.
Specifically:
a. Scheduling of dividends, proxies, report mailings and special
mailings.
b. Coordinate with the Trust shipment of materials for scheduled
mailings.
c. Liaison between the Trust and support services for preparation
of proofs and eventual printing of statement forms, proxy cards,
envelopes, etc.
d. Handle all notification to the client regarding proxy tabulation
through the meeting. Coordinate scheduling of materials
including voted cards, tabulation letters, and shareholder list
to be available for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
f. Implement new operational procedures, e.g., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions, etc.
g. Coordinate with systems, services and operations, special
events, e.g., mergers, new fund start ups, household mailings,
additional mail files.
h. Prepare standard operating procedures and review prospectuses
for new start up funds and our current client base. Coordinate
implementation of suggested changes with the Trust.
i. Liaison between the Trust and the Transfer Agency staff
regarding all service and operational issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and mailroom.
Tabulation of returned cards.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Trust's direction.
b. Provide daily and monthly reports to enable the Trust to do
necessary state filings.
* Separate fees will apply for these services.
A-7
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DAILY REPORTS
-------------
REPORT NUMBER REPORT DESCRIPTION
------------- ------------------
-- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
MONTHLY REPORTS
---------------
REPORT DESCRIPTION
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
Month To Date Sales - Demographics by Account Group
Account Analysis by Type
A-7a
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SCHEDULE "B"
------------
SHAREHOLDER SERVICES AND TRANSFER AGENT FEE SCHEDULE
FOR
SAGE/TSO TRUST
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. Transfer Agent and Shareholder Services:
Subject to the minimum fee stated below, the Trust agrees to pay
Fund/Plan an Annual Maintenance Fee of $20.00 per account.
Minimum annual fee (first two years) of $27,000 (1/12th payable
monthly) for Class A Shares and $15,000 (1/12th payable monthly)
for Class D Shares.
Note that the fees quoted herein have been discounted from
Fund/Plan's standard fees. If this Agreement is continued after
its initial 2 year term, the fees paid by the Trust will be quoted
at Fund/Plan's then standard fees.
II. IRA's, 403(b) Plans, Defined Contribution/Benefit Plans:
$12.00 per account/per year/Annual Maintenance Fee (normally
charged to shareholder)
III. FUND/SERV Processing (if applicable)
$1,000 One time start-up fee
$50.00 Per portfolio monthly maintenance fee
IV. Networking Processing (if applicable)
$1,000 One time start-up fee
$75.00 Per portfolio monthly maintenance fee
V. Out of Pocket Expenses:
Sage/Tso Trust will reimburse Fund/Plan Services monthly for all
reasonable out-of-pocket expenses, including postage, stationery
(statements), telecommunications (telephone, fax, dedicated 800 line,
on-line access), special reports, transmissions, records retention,
tapes, couriers and any pre-approved travel expenses.
VI. Additional Services
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations or the addition
or deletion of a series are not included herein, and will be quoted
separately. To the extent Sage/Tso Trust should decide to issue
additional separate classes of shares, additional fees will apply. Any
enhanced services, programming requests or reports will be quoted upon
request.
A-8
<PAGE>
SCHEDULE "C"
------------
Identification of Series
Below are listed the "Series" to which services under this Agreement are to be
performed as of the execution date of the Agreement:
"Sage/Tso Trust"
1. America Asia Allocation Growth Fund - Class A Shares
2. America Asia Allocation Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
EXHIBIT 99.9b
<PAGE>
ADMINISTRATION AGREEMENT
This Agreement, dated as of the day of , 1996, made by and between
Sage/Tso Trust, a business trust (the "Trust") operating an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), duly organized and existing under the laws of the State of
Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby
Fund/Plan will provide certain administration services to the Trust on the terms
and conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust will provide all necessary information to Fund/Plan
concerning the Series so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as
administrator and Fund/Plan hereby accepts such appointment. The Trust further
agrees to appoint Fund/Plan as administrator to any additional Series which,
from time to time, may be added to the Trust.
Section 2. Duties and Obligations of Fund/Plan
---------- -----------------------------------
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the Trust,
Fund/Plan shall provide to each of the Series all administrative services set
forth in Schedule "A" attached hereto, which Schedule is incorporated by
reference in its entirety into this Agreement. In addition to the obligations
1
<PAGE>
set forth in Schedule "A", Fund/Plan shall (i) provide its own office space,
facilities, equipment and personnel for the performance of its duties under this
Agreement; and (ii) take all actions it deems necessary to properly execute the
administrative responsibilities of the Trust.
(b) So that Fund/Plan may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with Fund/Plan and to provide such
information, documents and advice relating to the Trust as is within the
possession or knowledge of such persons provided that no such person need
provide any information to Fund/Plan if to do so would, in the reasoned opinion
of counsel to the Trust, result in the loss of any privilege or confidential
treatment with respect to such information. In connection with its duties,
Fund/Plan shall be entitled to rely, and shall be held harmless by the Trust
when acting in reasonable reliance upon the instruction, advice or any documents
provided by the Trust to Fund/Plan by any of the aforementioned persons. All
fees charged by any such persons shall be deemed an expense of the Trust.
(c) Any activities performed by Fund/Plan under this Agreement shall
conform to the requirements of:
(1) the provisions of the Act and the Securities Act of 1933,
as amended, and of any rules or regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Trust Instrument of the Trust, as
amended from time to time;
(4) any policies and determinations of the Board of Trustees
of the Trust; and
(5) the fundamental policies of the Trust as reflected in its
registration statement filed pursuant to the Act.
Fund/Plan acknowledges that all records that it maintains for the Trust
are the property of the Trust and will be surrendered promptly to the Trust upon
written request. Fund/Plan will preserve, for the periods prescribed under Rule
31a-2 under the Act, all such records required to be maintained under Rule 31a-1
of the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any officer
thereof from
2
<PAGE>
acting as administrator for any other person, firm or corporation. While the
administrative services supplied to the Trust may be different than those
supplied to other persons, firms or corporations, Fund/Plan shall provide the
Trust equitable treatment in supplying services. The Trust recognizes that it
will not receive preferential treatment from Fund/Plan as compared with the
treatment provided to other Fund/Plan clients. Fund/Plan agrees to maintain the
records and all other information of the Trust in a confidential manner and
shall not use such information for any purpose other than the performance of
Fund/Plan's duties under this Agreement.
Section 3. Allocation of Expenses All costs and expenses of the Trust
shall be paid by the Trust including, but not limited to:
(a) fees paid to an investment adviser (the "Adviser");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are not
affiliated persons of the Adviser;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder
servicing agent, fees and expenses;
(h) fees and expenses incident to the registration of the
shares of the Trust under Federal or state securities
laws;
(i) expenses related to preparing, setting in type,
printing and mailing prospectuses, statements of
additional information, reports and notices and proxy
material to shareholders of the Trust;
(j) all expenses incidental to holding meetings of
shareholders and Trustees of the Trust;
(k) such extraordinary expenses as may arise, including
litigation, affecting the Trust and the legal
obligations which the Trust may have regarding
indemnification of its officers and directors; and
(l) fees and out-of-pocket expenses paid on behalf of the
Trust by Fund/Plan.
Section 4. Compensation of Fund/Plan The Trust agrees to pay Fund/Plan
compensation for its services and to reimburse it for expenses, at the rates and
amounts as set forth in Schedule "B" attached hereto, and as shall be set forth
in any amendments to such Schedule "B" approved by the Trust and Fund/Plan. The
Trust agrees and understands that Fund/Plan's compensation be comprised of two
components and payable on a monthly basis as follows:
(i) an asset based fee calculated on the Trust's total assets subject
to a minimum fee
3
<PAGE>
calculated on the number of series and classes within each series, which the
Trust hereby authorizes Fund/Plan to collect by debiting the Trust's custody
account for invoices which are rendered for the services performed for the
applicable function. The invoices for the services performed will be sent to the
Trust after such debiting with the indication that payment has been made; and
(ii) reimbursement of any out-of-pocket expenses paid by Fund/Plan on
behalf of the Trust, which out-of-pocket expenses will be billed to the Trust
within the first ten calendar days of the month following the month in which
such out-of-pocket expenses were incurred. The Trust agrees to reimburse
Fund/Plan for such expenses within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
the Trust's net assets shall be computed at the times and in the manner
specified in the Trust's Prospectus and Statement of Additional Information then
in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
Section 5. Duration
---------- --------
(a) The term of this Agreement shall be for a period of two (2) years,
commencing on the date which the Trust's registration statement is declared
effective by the U.S. Securities and Exchange Commission ("Effective Date") and
shall continue thereafter on a year to year term subject to termination by
either Party set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall be fixed
for two (2) years commencing on the Effective Date of this Agreement and shall
continue thereafter subject to review and adjustment as determined by the
Parties.
(c) After the initial term of this Agreement, the Trust or Fund/Plan
may give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred eighty (180) days after the date of receipt of such
notice. Upon the effective termination date, the Trust shall pay to Fund/Plan
such compensation as may be due as of the date of termination and shall likewise
reimburse Fund/Plan for any out-of-pocket expenses and disbursements
4
<PAGE>
reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or responsibilities
under this Agreement is designated by the Trust by written notice to Fund/Plan
in connection with the termination of this Agreement, Fund/Plan shall promptly,
upon such termination and at the expense of the Trust, transfer all records
which are the property of the Trust and shall cooperate in the transfer of such
records and its duties and responsibilities under the Agreement.
Section 6. Amendment No provision of this Agreement may be amended or
modified, in any manner except by a written agreement properly authorized and
executed by Fund/Plan and the Trust.
Section 7. Applicable Law This Agreement shall be governed by the laws
of the State of Virginia and the exclusive venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 8. Authority of Signatories The Parties represent and warrant
to each other that the execution and delivery of this Agreement by the
undersigned officer of each Party has been duly and validly authorized; and,
when duly executed, this Agreement will constitute a valid and legally binding
enforceable obligation of each Party. The obligations under this Agreement shall
be binding upon the assets and property of the Trust and shall not be binding
upon any officer or shareholder of the Series individually.
Section 9. Limitation of Liability
---------- -----------------------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, director, employee or
agent of the Trust, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or under the control or direction of
Fund/Plan even though
5
<PAGE>
such person may receive compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of (i) any action taken or
omitted to be taken by Fund/Plan in good faith, (ii) any action taken or omitted
to be taken by Fund/Plan in good faith in reliance upon any certificate,
instrument, order or stock certificate or other document reasonably believed by
Fund/Plan to be genuine and signed, countersigned or executed by any duly
authorized person, upon the oral or written instruction of an authorized person
of the Trust or upon the opinion of legal counsel to the Trust; or (iii) any
action taken in good faith or omitted to be taken by Fund/Plan in connection
with its appointment in reliance upon any law, act, regulation or interpretation
of the same even though the same may thereafter have been altered, changed,
amended or repealed. Indemnification under this subparagraph shall not apply,
however, to actions or omissions of Fund/Plan or its directors, officers,
employees, shareholders or agents in cases of its or their willful misfeasance,
bad faith, gross negligence or reckless disregard of its or their duties
hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 9(c) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the defense
of any action, suit or proceeding in which Fund/Plan is involved and for which
indemnity is being provided by the Trust to Fund/Plan. The Trust may negotiate
the settlement of any action, suit or proceeding subject to Fund/Plan's
approval, which shall not be unreasonably withheld. Fund/Plan shall have the
right, but not the obligation, to participate in the defense or
6
<PAGE>
settlement of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such participation
will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of an
action or proceeding and to retain its own counsel, and the reasonable fees and
expenses of such counsel shall be borne by the Trust (which shall pay such fees,
costs and expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the Trust to represent Fund/Plan would
present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and the Trust, and legal counsel to
Fund/Plan shall have reasonably concluded that there are legal defenses
available to it which are different from or additional to those available to the
Trust or which may be adverse to or inconsistent with defenses available to the
Trust (in which case the Trust shall not have the right to direct the defense of
such action on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding anything to the
contrary herein, it is understood that the Trust shall not, in connection with
any action, suit or proceeding or related action, suit or proceeding, be liable
under this Agreement for the fees and expenses of more than one firm.
(d) The terms of this Section 9 shall survive the termination of this
Agreement.
Section 10. Notices Except as otherwise provided in this Agreement, any
notice or other communication required by or permitted to be given in connection
with this Agreement shall be in writing, and shall be delivered in person or
sent by first class mail or by overnight delivery, postage prepaid to the
respective parties as follows:
If to Sage/Tso Trust: If to Fund/Plan:
- --------------------- -----------------
Sage/Tso Investment Management L.P. Fund/Plan Services, Inc.
7799 Leesburg Pike, Suite 900 2 West Elm Street
Falls Church, Virginia 22043 Conshohocken, PA 19428
Attention: James C. Tso, President Attention: Kenneth J. Kempf, President
Section 11. If any part, term or provision of this Agreement is held by
any court to be
7
<PAGE>
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby substantially
impaired.
Section 12. This Agreement shall extend to and shall be binding upon
the Parties and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Trust without the written consent
of Fund/Plan or by Fund/Plan without the written consent of the Trust,
authorized or approved by a resolution of their respective Boards of Directors
or Trustees.
Section 13. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 14. This Agreement shall be governed by the laws of the
Commonwealth of Virginia and the exclusive venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 15. Section Headings Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eight typewritten pages, together with Schedules "A", "B" and "C,"
to be signed by their duly authorized officers as of the day and year first
above written.
Sage/Tso Trust Fund/Plan Services, Inc.
- -------------- ------------------------
/s/ James C. Tso /s/ Kenneth J. Kempf
- ----------------------------- --------------------------------
By: James C. Tso, President By: Kenneth J. Kempf, President
8
<PAGE>
SCHEDULE "A"
------------
FUND ADMINISTRATION SERVICES
FOR
SAGE/TSO TRUST
Additional Tasks
for Multiple Classes
--------------------
I. Regulatory Compliance
---------------------
A. Compliance - Investment Company Act of 1940,
as amended
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts............... additional liability
d. distribution (12b-1) plans........... each class may have a
different plan
e administration contracts
f. accounting contracts
g. custody administration contracts
h. custody contract
i. transfer agent and shareholder
services contracts
2. Filings
a N-SAR (semi-annual report)........... additional reporting
required
b. N-1A (Registration Statement, requires some
post-effective amendments and additional reporting
supplements thereto ("stickers") for cap stock and
financial information
c. Notice pursuant to Rule 24f-2:
indefinite registration of shares
d. fidelity bond under 17g-1
e. shareholder reports under 30(b)2-1
3. Annual up-dates of biographical and financial
information through questionnaires for
Directors/Trustees and Officers
B. Compliance - Other
1. applicable stock exchange rules
2. applicable state tax laws
A-1
<PAGE>
Additional Tasks
for Multiple Classes
--------------------
II. Corporate Business and Shareholder/Public Information
------------------------------------------------------
A. Trustees/Management
1. Preparation of quarterly Trustees' meetings
a. draft agendas - all necessary items
of compliance.......................... separate special reports
on 12b-1 income and
expenditures
b. arrange and conduct meetings
c. prepare minutes of meetings
d. keep attendance records
e. maintain corporate records/
minute book
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
C. Maintain Corporate Calendars and Files ........ separate by class
D. Release Corporate Information (as directed by management)
1. To shareholders
2. To financial and general press
3. To industry publications............... additional
questionnaires
and/or announcements
some pertinent to only
one class
a. distributions (dividends and
capital gains)................ separate calculation for
each class
b. tax information
c. changes to prospectus
d. letters from management
e. funds' performance............ separate performance
by class
4. Respond to:
a. financial press
b. miscellaneous shareholders
inquiries
c. industry questionnaires
A-2
<PAGE>
Additional Tasks
for Multiple Classes
--------------------
E. Communications to Shareholders................. separate class
information for
financial highlights
table and notes
1. Coordinate printing and distribution
of annual, semi-annual reports,
and prospectus
III. Financial and Management Reporting
A. Income and Expenses
1. Expense figures calculated and
accrual levels set....................... separate by class
2. Monitoring of expenses and expense
caps (monthly)........................... separate by class
3. Approve and coordinate payment of
expenses
4. Checking Account Reconciliation
(monthly) and establish Trust operating
expense checking account
5. Calculation of advisory fee, 12b-1 fee
and reimbursements to Trust (if applicable)
6. Approve the recording and amortization
of organizational costs and pre-paid
expenses (supplied by Adviser) for
start-up funds and reorganizations
7. Calculation of average net assets
B. Distributions to Shareholders
1. Projections of distribution amounts
2. Calculations of dividends and capital
gain distributions (in conjunction with the
Trust and its auditors)................... separate dividend
calculations
a. compliance with income tax provisions requires additional
calculations
b. compliance with excise tax provisions
c. compliance with Investment Company
Act of 1940, as amended
A-3
<PAGE>
Additional Tasks
for Multiple Classes
--------------------
C. Financial Reporting
1. Liaison between fund management,
independent auditors and printers
for shareholder reports................ requires additional
formatting and review
2. Prepare and review semi-annual
and annual reports to shareholders..... requires additional
disclosure and reporting
3. 60 day delivery to SEC and by class
shareholders
4. Prepare and review semi-annual and
annual N-SAR's (financial data)........ requires additional
disclosure and reporting
by class
5. Preparation of Financial Statements
for required SEC Post-Effective
Amendments (if applicable) ............ requires additional
disclosure and reporting
by class
D. Subchapter M Compliance (monthly)
1. Asset diversification test
2. Short/short test
3. Income qualification test
E. Other Financial Analysis
1. Upon request from Trust management,
other budgeting and analyses can be
constructed to meet specific needs
(fee revisions may be necessary)....... requires additional
disclosure and reporting
by class
2. Sales information, portfolio turnover
(monthly)
3. Support independent accountants to the
Trust regarding the calculation of
any return of capital or excise tax.... requires additional
disclosure and reporting
by class
4. Total return calculation (monthly)..... separate by class
5. 1099 Miscellaneous - prepared for
Directors/Trustees (annual)
6. Analysis of interest derived from various
A-4
<PAGE>
Additional Tasks
for Multiple Classes
--------------------
6. Government obligations (annual) (if
interest income was distributed in a calendar
year)
F. Review and Monitoring Functions (monthly)
1. Review expense and reclassification
entries to ensure proper update............. requires additional
disclosure and reporting
by class
2. Perform various reviews to ensure
accuracy of subscription/liquidation
schedules, monthly expense analyses
and daily custodian bank statements to
verify accurate money movement.............. requires additional
review by class
3. Review expense accruals and expend-
itures for accuracy......................... separate by class
G. Preparation and distribution of operational
reports to management by 10th business day
of each month................................... requires additional
disclosure and reporting
by class
1. Management Statistics (Recap)........... separate by class
a. portfolio
b. book gains/losses/per share
c. net income, book income/per share
d. capital stock activity
e. distributions
2. Performance Analysis.................... separate by class
a. total return
b. monthly, quarterly,
year to date, average annual returns
3. Expense Analysis........................ separate by class
a. summary of due to/from adviser
b. expenses paid
c. expense cap
d. accrual monitoring
e. advisory fee
4. Short-Short Analysis
a. short-short income test (i.e. 30% test)
b. gross income (components)
5. Portfolio Turnover
a. market value
A-5
<PAGE>
Additional Tasks
for Multiple Classes
--------------------
5. b. cost of purchases
c. net proceeds of sales
d. average market value
6. Asset Diversification Test
a. gross assets
b. non-qualifying assets
7. Shareholder Activity Summary.......... separate by class
a. shares sold, redeemed and reinvested
b. change in investment
H. Provide rating agencies statistical data as requires additional
requested (monthly/quarterly)................ reporting by class
I. For Money-Market Funds - Rule 2a-7 weekly
compliance monitoring
J. Standard schedules for Board Package (Quarterly) separate by class
1. Shareholder Activity Summary
(III-G-7 from above)
2. Expense analysis
3. Other schedules can be provided
(additional fees may apply)
IV. Special Issues Related to Foreign Securities
--------------------------------------------
A. Financial Reporting
1. Interface with custodian bank to monitor
and review tax reclaims chronologically,
by country and type; report on same to
Trust management
2. Review and provide reports on the
treatment of currency gain/loss and
capital gain/loss in conjunction with
the Trust's independent accountants
a. IRS Section 988 transactions
b. IRS Section 1256 contracts
c. IRS Section 1092 deferrals
3. Tax Reporting (depending on the level
of assistance required by the Trust's
independent accountants, fees revisions
A-6
<PAGE>
Additional Tasks
for Multiple Classes
--------------------
3. may be necessary)...................... requires additional
disclosure and reporting
by class
a. Analyze tax treatment of foreign
investments based on the Trust's
elections and their impact on:
1. Subchapter M tests --e.g.
diversification, qualified income,
short-short (30% tests)
2. Taxable income and capital gains
3. Prepare excise taxk worksheets..... requires additional
disclosure and reporting
by class
b. Calculate distributions to shareholders separate by class
1. Monitor character and impact of
realized currency gain/loss on
distribution amount
4. Assist the Adviser and work with the independent
accountants to identify Passive Foreign Investment
Company's (PFIC's) (by providing a list
of potential PFIC's that the Trust may be holding)
A-7
<PAGE>
SCHEDULE "B"
------------
ADMINISTRATION SERVICES FEE SCHEDULE
FOR
SAGE/TSO TRUST
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
I. Subject to a minimum annual fee of $55,000 for the initial Series'
first class of shares and $12,000 for each additional separate series
or class thereof, the Trust agrees to pay Fund/Plan each month an asset
based fee calculated at the annual rate of:
.0015 On the First $ 50 Million of the Average Total Assets of the Trust;
.0010 On the Next $ 50 Million of the Average Total Assets of the Trust; and
.0005 Over $100 Million of the Average Total Assets of the Trust
Please note that if the Trust purchases more than five foreign
securities, the minimum for each additional separate series or class of
shares increases to $15,000.
II. Out-of-Pocket Expenses:
-----------------------
The Trust will reimburse Fund/Plan Services monthly for all
out-of-pocket expenses, including postage, telecommunications
(telephone and fax), special reports, cost of EDGAR filings, Board
Meeting materials, approved record retention, transportation costs as
incurred and copying and sending materials to independent accountants
for off-site audits.
III. Additional Services
-------------------
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not
included herein, and may be quoted separately upon request. To the
extent the Trust should decide to issue additional multiple/separate
classes of shares, additional fees will apply. Any additional/enhanced
services or reports will be quoted upon request.
IV. Blue Sky Administration
------------------------
$100 per permit/per state/per year
NOTE: The above fee will cover normal business filings described in our
outline. An additional fee of $25 per filing will be charged for non
standard filings such as secondary post effective amendments,
additional classes or shares or mergers and acquisitions.
<PAGE>
SCHEDULE "C"
------------
Identification of Series
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Sage/Tso Trust"
1. America Asia Allocation Growth Fund - Class A Shares
2. America Asia Allocation Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
EXHIBIT 99.9c
<PAGE>
ACCOUNTING SERVICES AGREEMENT
This Agreement, dated as of the --- day of -------, 1996 made by and
between Sage/Tso Trust (the "Trust"), a business trust operating as an open end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), duly organized and existing under the laws of the
State of Delaware and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly
organized and existing under the laws of the State of Delaware (collectively,
the "Parties"). WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series and separate classes of shares (the
"Classes") are identified on Schedule "C" attached hereto, and which Schedule
"C" may be amended from time to time by mutual agreement of the Trust and
Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Trust (the
"Accounts and Records") and to perform certain other functions in connection
with such Accounts and Records pursuant to the terms and conditions set forth in
this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform
such functions pursuant to the terms and conditions set forth in this Agreement;
and
WHEREAS, the Trust will provide all necessary information concerning
the Series to Fund/Plan so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
Section 1. Appointment The Trust hereby appoints Fund/Plan as
Accounting Services Agent and Fund/Plan hereby accepts such appointment. The
Trust also agrees to appoint Fund/Plan as Accounting Services Agent for any
additional Series which, from time to time, may be added to the Trust.
Section 2. Definitions. For purposes of this Agreement:
1
<PAGE>
Oral Instructions shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to Fund/Plan in
person or by telephone, telegram, telecopy, or other mechanical or documentary
means lacking an original signature, by a person or persons reasonably
identified to Fund/Plan to be a person or persons authorized by a resolution of
the Board of Trustees of the Trust, to give such Oral Instructions on behalf of
the Trust.
Written Instructions shall mean an authorization, instruction,
approval, item or set of data or information of any kind transmitted to
Fund/Plan in original writing containing an original signature or a copy of such
document transmitted by telecopy including transmission of such signature
reasonably identified to Fund/Plan to be the signature of a person authorized by
a resolution of the Board of Trustees of the Trust to give written instructions
on behalf of the Trust.
The Trust shall file with Fund/Plan a certified copy of each resolution
of its Board of Trustees authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 3. To the extent Fund/Plan receives the necessary information
from the Trust or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records and any other
records required to be kept pursuant to Rule 31a-1 of the Act relating to the
business of the Trust in such form as may be mutually agreed upon between the
Trust and Fund/Plan:
(a) Cash Receipts Journal
(b) Cash Disbursements Journal
(c) Dividends Paid and Payable Schedule
(d) Purchase and Sales Journals - Portfolio Securities
(e) Subscription and Redemption Journals
(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report
(g) Broker Ledger - Commission Report
(h) Daily Expense Accruals
(i) Daily Interest Accruals
(j) Daily Trial Balance
(k) Portfolio Interest Receivable and Income Journal
(l) Portfolio Dividend Receivable and Income Register
(m) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security.
(n) Average Daily Net assets provided on monthly basis.
The necessary information to perform the above functions and the
calculation of the
2
<PAGE>
net asset value of the Trust as provided below, is to be furnished by Written or
Oral Instructions to Fund/Plan each day (in accordance with the time frame
identified below) prior to the close of regular trading on the New York Stock
Exchange.
Section 4. Fund/Plan shall perform the ministerial calculations
necessary to calculate the net asset value for each Class of shares each day
that the New York Stock Exchange is open for business, in accordance with; (i)
the current Prospectus and Statement of Additional Information for the Trust,
and (ii) procedures with respect thereto approved by the Board of Trustees of
the Trust and supplied in writing to Fund/Plan. Portfolio items for which market
quotations are available by Fund/Plan's use of an automated financial
information service (the "Service") shall be based on the closing prices of such
Service except where the Trust has given or caused to be given specific Written
or Oral Instructions to utilize a different value subject to the appropriate
provisions in the Trust's Prospectus and Statement of Additional Information
then in effect. All of the portfolio securities shall be given such values as
the Trust provides by Written or Oral Instructions including all restricted
securities and other securities requiring valuation not readily ascertainable
solely by such Service subject to the appropriate provisions in the Trust's
Prospectus and Statement of Additional Information then in effect. Fund/Plan
shall have no responsibility or liability for; (i) the accuracy of prices quoted
by such Service; (ii) the accuracy of the information supplied by the Trust, or
(iii) any loss, liability, damage, or cost arising out of any inaccuracy of such
data. Fund/Plan shall have no responsibility or duty to include information or
valuations to be provided by the Trust in any computation unless and until it is
timely supplied to Fund/Plan in usable form. Fund/Plan shall record corporate
action information as received from the custodian of the Trust's assets (the
"Custodian"), the Service or the Trust. Fund/Plan shall have no duty to gather
or record corporate action information not supplied by these sources.
Fund/Plan will assume no liability for price changes caused by the
investment adviser(s), the Custodian, suppliers of security prices and corporate
action and dividend information, or any party other than Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price change
of an amount greater than or equal to one half of one percent of the correct net
asset value ("NAV"), consideration must be given to the effect of the price
change as described below.
Notwithstanding the provisions of Section 12, the following provisions
govern
3
<PAGE>
Fund/Plan's liability for errors in calculating the NAV of the Series:
If the NAV should have been higher for a date or dates in the
past, the error would have the effect of having given more shares to
subscribers and less money to redeemers to which they were entitled.
Conversely, if the NAV should have been lower, the error would have the
effect of having given less shares to subscribers and overpaying
redeemers.
If the error affects the prior business day's NAV only, and if
Fund/Plan can rerun the prior day's work before shareholder statements
and checks are mailed, the Trust hereby accepts this manner of
correcting the error.
If the error spans five (5) business days or less, Fund/Plan
shall reprocess shareholder purchases and redemptions where redeeming
shareholders have been underpaid. Fund/Plan shall assume liability to
the Trust for overpayments to shareholders who have fully redeemed.
If the error spans more than five (5) business days, Fund/Plan
would bear the liability to the Trust for, (i) paying for the excess
shares given to shareholders if the NAV should have been higher, or,
(ii) funding overpayments to shareholders who have redeemed if the NAV
should have been lower. The cost of any reprocessing required for
shareholders who have been credited with fewer shares than appropriate
or for redeeming shareholders who are due additional amounts of money
will also be borne by Fund/Plan.
Section 5. For all purposes under this Agreement, Fund/Plan is
authorized to act upon receipt of the first of any Written or Oral Instruction
it receives from the Trust or its agents on behalf of the Trust. In cases where
the first instruction is an Oral Instruction that is not in the form of a
document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where Fund/Plan receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Trust shall cause the
broker/dealer executing such transaction to send a written confirmation to the
Custodian. Fund/Plan shall be entitled to rely on the first Instruction
received, and for any act or omission undertaken in compliance therewith shall
be free of liability and fully indemnified and held harmless by the Trust,
provided however, that in the event a Written or Oral Instruction received by
Fund/Plan is countermanded by a timely
4
<PAGE>
received subsequent Written or Oral Instruction prior to acting upon such
countermanded Instruction, Fund/Plan shall act upon such subsequent Written or
Oral Instruction. The sole obligation of Fund/Plan with respect to any follow-up
or confirmatory Written Instruction, Oral Instruction in documentary or written
form, shall be to make reasonable efforts to detect any such discrepancy between
the original Instruction and such confirmation and to report such discrepancy to
the Trust. The Trust shall be responsible, at the Trust's expense, for taking
any action, including any reprocessing, necessary to correct any discrepancy or
error. To the extent such action requires Fund/Plan to act, the Trust shall give
Fund/Plan specific Written Instruction as to the action required.
Section 6. The Trust shall cause the Custodian to forward to Fund/Plan
a daily statement of cash and portfolio transactions. At the end of each month,
the Trust shall cause the Custodian to forward to Fund/Plan a monthly statement
of portfolio positions, which will be reconciled with the Trust's Accounts and
Records maintained by Fund/Plan. Fund/Plan will report any discrepancies to the
Custodian, and report any unreconciled items to the Trust.
Section 7. Fund/Plan shall promptly supply daily and periodic reports
to the Trust as requested by the Trust and agreed upon by Fund/Plan.
Section 8. The Trust shall provide and shall require each of its agents
(including the Custodian) to provide Fund/Plan as of the close of each business
day, or on such other schedule as the Trust determines is necessary, with
Written or Oral Instructions (to be delivered to Fund/Plan by 11:00 a.m.,
Eastern time, the next following business day) containing all data and
information necessary for Fund/Plan to maintain the Trust's Accounts and Records
and Fund/Plan may conclusively assume that the information it receives by
Written or Oral Instructions is complete and accurate.
Section 9. The Accounts and Records, in the agreed-upon format,
maintained by Fund/Plan shall be the property of the Trust and shall be made
available to the Trust promptly upon request and shall be maintained for the
periods prescribed in Rules 31a-1 and 31a-2 under the Act. Fund/Plan shall
assist the Trust's independent auditors, or upon approval of the Trust, or upon
demand, any regulatory body, in any requested review of the Trust's Accounts and
Records but shall be reimbursed for all expenses and employee time invested in
any such review outside of routine and normal periodic review and audits. Upon
receipt from the Trust of the necessary information, Fund/Plan shall supply the
necessary data for the Trust
5
<PAGE>
or an independent auditor's completion of any necessary tax returns,
questionnaires, periodic reports to Shareholders and such other reports and
information requests as the Trust and Fund/Plan shall agree upon from time to
time.
Section 10. In case of any request or demand for the inspection of the
records of the Trust, Fund/Plan shall use its best efforts to notify the Trust
and to secure instructions as to permitting or refusing such inspection.
Fund/Plan may however, exhibit such records to any person in any case where it
is advised in writing by its counsel that it may be held liable for failure to
do so.
Section 11. Fund/Plan and the Trust may from time to time adopt such
procedures as agreed upon in writing, and Fund/Plan may conclusively assume that
any procedure approved by the Trust or directed by the Trust, does not conflict
with or violate any requirements of the Trust's Prospectus, Statement of
Additional Information, Trust Instrument or any rule or regulation of any
regulatory body or governmental agency. The Trust shall be responsible for
notifying Fund/Plan of any changes in regulations or rules which might
necessitate changes in Fund/Plan's procedures, and for working out with
Fund/Plan such changes.
Section 12. Limitation of Liability
----------- -----------------------
(a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall only be liable for any error of judgment or mistake of law or for
any loss suffered by the Trust in connection with the performance of this
Agreement that result from willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of Fund/Plan in the performance of its
obligations and duties under this Agreement.
(b) Any person, even though a director, officer, employee, shareholder
or agent of Fund/Plan, who may be or become an officer, director, employee or
agent of the Trust, shall be deemed when rendering services to such entity or
acting on any business of such entity (other than services or business in
connection with Fund/Plan's duties under the Agreement), to be rendering such
services to or acting solely for the Trust and not as a director, officer,
employee, shareholder or agent of, or under the control or direction of
Fund/Plan even though such person may receive compensation from Fund/Plan.
(c) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or
6
<PAGE>
without basis in fact or law) of any and every nature which Fund/Plan may
sustain or incur or which may be asserted against Fund/Plan by any person by
reason of, or as a result of (i) any action taken or omitted to be taken by
Fund/Plan in good faith, (ii) any action taken or omitted to be taken by
Fund/Plan in good faith in reliance upon any certificate, instrument, order or
stock certificate or other document reasonably believed by Fund/Plan to be
genuine and signed, countersigned or executed by any duly authorized person,
upon the oral or written instruction of an authorized person of the Trust or
upon the opinion of legal counsel to the Trust; or (iii) any action taken in
good faith or omitted to be taken by Fund/Plan in connection with its
appointment in reliance upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered, changed, amended or
repealed. Indemnification under this subparagraph shall not apply, however, to
actions or omissions of Fund/Plan or its directors, officers, employees,
shareholders or agents in cases of its or their willful misfeasance, bad faith,
gross negligence or reckless disregard of its or their duties hereunder.
If a claim is made against Fund/Plan as to which Fund/Plan may seek
indemnity under this Section, Fund/Plan shall notify the Trust promptly after
any written assertion of such claim threatening to institute an action or
proceeding with respect thereto and shall notify the Trust promptly of any
action commenced against Fund/Plan within ten (10) days after Fund/Plan shall
have been served with a summons or other legal process, giving information as to
the nature and basis of the claim. Failure so to notify the Trust shall not,
however, relieve the Trust from any liability which it may have on account of
the indemnity under this Section 12(c) if the Trust has not been prejudiced in
any material respect by such failure.
The Trust and Fund/Plan shall cooperate in the control of the defense
of any action, suit or proceeding in which Fund/Plan is involved and for which
indemnity is being provided by the Trust to Fund/Plan. The Trust shall may
negotiate the settlement of any action, suit or proceeding subject to
Fund/Plan's approval, which shall not be unreasonably withheld. Fund/Plan shall
have the right, but not the obligation, to participate in the defense or
settlement of a claim or action, with its own counsel, but any costs or expenses
incurred by Fund/Plan in connection with, or as a result of, such participation
will be borne solely by Fund/Plan.
Fund/Plan shall have the right to participate in the defense of an
action or proceeding
7
<PAGE>
and to retain its own counsel, and the reasonable fees and expenses of such
counsel shall be borne by the Trust (which shall pay such fees, costs and
expenses at least quarterly) if:
(i) Fund/Plan has received an opinion of counsel
stating that the use of counsel chosen by the Trust to represent Fund/Plan would
present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such
action or proceeding include both Fund/Plan and the Trust, and legal counsel to
Fund/Plan shall have reasonably concluded that there are legal defenses
available to it which are different from or additional to those available to the
Trust or which may be adverse to or inconsistent with defenses available to the
Trust (in which case the Trust shall not have the right to direct the defense of
such action on behalf of Fund/Plan); or
(iii) the Trust shall authorize Fund/Plan to employ
separate counsel at the expense of the Trust. Notwithstanding anything to the
contrary herein, it is understood that the Trust shall not, in connection with
any action, suit or proceeding or related action, suit or proceeding, be liable
under this Agreement for the fees and expenses of more than one firm.
(d) The terms of this Section 12 shall survive the termination of this
Agreement.
Section 13. All financial data provided to, processed by, and reported
by Fund/Plan under this Agreement shall be stated in United States dollars.
Fund/Plan's obligation to convert, equate or deal in foreign currencies or
values extends only to the accurate transposition of information received from
the various pricing and informational services into Fund/Plan's Investment
Accounting System.
Section 14. The Trust agrees to pay Fund/Plan compensation for its
services and to reimburse it for expenses, at the rates and amounts as set forth
in Schedule "B" attached hereto, and as shall be set forth in any amendments to
such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and
understands that Fund/Plan's compensation be comprised of two components and
payable on a monthly basis as follows:
(i) an asset based fee calculated on the Trust's
total assets, subject to a minimum fee calculated on the number of Series and
classes within each Series, which the Trust hereby authorizes Fund/Plan to
collect by debiting the Trust's custody account for invoices which are rendered
for the services performed for the applicable function. The
8
<PAGE>
invoices for the services performed will be sent to the Trust after such
debiting with the indication that payment has been made. And,
(ii) reimbursement of any reasonable out-of-pocket
expenses paid by Fund/Plan on behalf of the Trust, which out-of-pocket expenses
will be billed to the Trust within the first ten calendar days of the month
following the month in which such out-of-pocket expenses were incurred. The
Trust agrees to reimburse Fund/Plan for such expenses within ten calendar days
of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the value of
the Series' net assets shall be computed at the times and in the manner
specified in the Series' Prospectus and Statement of Additional Information then
in effect.
During the term of this Agreement, should the Trust seek services or
functions in addition to those outlined above or in Schedule "A" attached, a
written amendment to this Agreement specifying the additional services and
corresponding compensation shall be executed by both Fund/Plan and the Trust.
Section 15. Nothing contained in this Agreement is intended to or shall
require Fund/Plan, in any capacity hereunder, to perform any functions or duties
on any holiday, day of special observance or any other day on which the New York
Stock Exchange is closed. Functions or duties normally scheduled to be performed
on such days shall be performed on, and as of, the next succeeding business day
on which the New York Stock Exchange is open. Notwithstanding the foregoing,
Fund/Plan shall compute the net asset value of each Series on each day required
pursuant to (i) Rule 22c-1 promulgated under the Investment Company Act of 1940,
as amended, and (ii) the Trust's Prospectus and Statement of Additional
Information then in effect.
Section 16.
-----------
(a) The term of this Agreement shall be for a period of two
(2) years, commencing on the date which the Trust's registration statement is
declared effective by the U.S. Securities and Exchange Commission ("Effective
Date") and shall continue thereafter on a year to year term subject to
termination by either Party as set forth in (c) below.
(b) The fee schedule set forth in Schedule "B" attached shall
be fixed for (2) years commencing on the Effective Date of this Agreement and
shall continue thereafter subject to its review, adjustment or termination as
set forth in section (c) below.
9
<PAGE>
(c) After the initial term of this Agreement, the Trust or
Fund/Plan may give written notice to the other of the termination of this
Agreement, such termination to take effect at the time specified in the notice,
which date shall not be less than one hundred eighty (180) days after the date
of receipt of such notice. Upon the effective termination date, the Trust shall
pay to Fund/Plan such compensation as may be due as of the date of termination
and shall likewise reimburse Fund/Plan for any out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) If a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the Trust by written
notice to Fund/Plan in connection with the termination of this Agreement,
Fund/Plan shall promptly upon such termination and at the expense of the Trust,
transfer all accounts and required records which belong to the Trust and shall
cooperate in the transfer of such records, and its duties and responsibilities
under the Agreement.
Section 17. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing, and shall be delivered in person or sent by
first class mail, postage prepaid to the respective parties as follows:
<TABLE>
<CAPTION>
<S> <C>
If to the Trust, Inc.: If to Fund/Plan:
- ---------------------- ----------------
Sage/Tso Investment Management L.P. Fund/Plan Services, Inc.
7799 Leesburg Pike, Suite 900 2 West Elm Street
Falls Church, VA 22043 Conshohocken, PA 19428
Attention: James C. Tso, Esq., President Attention: Kenneth J. Kempf, President
</TABLE>
Section 18. This Agreement may be amended from time to time by
supplemental agreement executed by the Trust and Fund/Plan and the compensation
stated in Schedule "B" attached hereto may be adjusted accordingly as mutually
agreed upon.
Section 19. The Parties represent and warrant to each other that the
execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and, when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
Section 20. This Agreement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an original, but such
counterparts shall together
10
<PAGE>
constitute but one and the same instrument.
Section 21. This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust without the
written consent of Fund/Plan or by Fund/Plan without the written consent of the
Trust, authorized or approved by a resolution of its respective Boards of
Directors and Trustees.
Section 22. This Agreement shall be governed by the laws of the
Commonwealth of Virginia and the exclusive venue of any action arising under
this Agreement shall be Montgomery County, Commonwealth of Pennsylvania.
Section 23. No provision of this Agreement may be amended or modified,
in any manner except by a written agreement properly authorized and executed by
Fund/Plan and the Trust.
Section 24. If any part, term or provision of this Agreement is held by
any court to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
consisting of eleven typewritten pages, together with Schedules "A", "B" and
"C", to be signed by their duly authorized officers as of the day and year first
above written.
Sage/Tso Trust Fund/Plan Services, Inc.
- -------------- ------------------------
/s/ James C. Tso /s/ Kenneth J. Kempf
- --------------------------------- -------------------------------
By: James C. Tso, Esq., President By: Kenneth J. Kempf, President
11
<PAGE>
SCHEDULE "A"
------------
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
TO BE PERFORMED ON BEHALF OF
SAGE/TSO TRUST
Daily Accounting Services
-------------------------
1) Calculate Net Asset Value ("NAV") and Offering Price Per Share:
---------------------------------------------------------------
Series Level
o Update the daily market value of securities held by each
Series using Fund/Plan's standard agents for pricing domestic
equity, bond and foreign securities. The domestic equity
pricing services are Reuters, Inc., Muller Data Corporation,
Kenny S&P and Interactive Data Corporation (IDC). Muller Data,
Telerate Systems, Inc., Kenny S&P and IDC are used for bond,
money market prices/yields and foreign prices/exchange rates.
Bloomberg is available and used for price research.
o Enter limited number of manual prices supplied by Sage/Tso
and/or broker.
o Review variance reporting on-line and in hard copy for price
changes in individual securities using variance levels
established by Sage/Tso. Verify US dollar security prices
exceeding variance levels by notifying Sage/Tso and pricing
sources of noted variances.
o Complete daily variance analysis on foreign exchange rates and
local foreign prices. Notification of changes exceeding
established levels for Sage/Tso verification. (Sage/Tso shall
establish tolerance levels for each country/currency so that
local price changes and foreign exchange rate changes
exceeding this tolerance are identified and NAV problems
minimized.)
o Review for ex-dividend items indicated by pricing sources;
trace to Fund's general ledger for agreement.
Series and Each Class
o Allocate daily unrealized appreciation/depreciation,
unrealized currency gains/losses, and unrealized gains/losses
on futures and forwards to classes based upon value of
outstanding class shares.
o Prepare NAV proof sheets. Review components of change in NAV
for reasonableness. Complete series and class control proofs.
o Communicate required pricing information (NAV) to Sage/Tso,
and electronically to NASDAQ.
2) Determine and Report Cash Availability to Series by approximately 9:30
-----------------------------------------------------------------------
AM Eastern Time:
----------------
Series Level
o Receive daily cash and transaction statements from the
Custodian by 8:30 AM Eastern time.
o Receive previous day shareholder activity reports from the
Trust's Transfer Agent by 8:30 AM Eastern time. Class level
shareholder activity will be
A-1
<PAGE>
accumulated into the Series available cash balances.
o Fax hard copy cash availability calculations with all details
to Sage/Tso.
o Supply the Trust with 3-day cash projection report.
o Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the
Custodian and Sage/Tso.
3) Reconcile and Record All Daily Expense Accruals:
------------------------------------------------
Series Level
o Accrue expenses based on budget supplied by Sage/Tso either as
percentage of net assets or specific dollar amounts.
o If applicable, monitor expense limitations established by
Sage/Tso.
o Accrue daily amortization of organizational expense.
Series and Each Class
o Class specific accruals completed such as daily accrual of
12b-1 expenses.
o Allocate series expenses to classes based upon value of
outstanding class shares.
4) Verify and Record All Daily Income Accruals for Debt Issues:
------------------------------------------------------------
Series Level
o Review and verify all system generated interest and
amortization reports.
o Establish unique security codes for bond issues to permit
segregated trial balance income reporting.
Series and Each Class
o Allocate income to classes based upon value of outstanding
class shares.
5) Monitor Domestic Securities held for cash dividends, corporate actions
and capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
Series Level
o Monitor electronically received information from Muller Data
Corporation for all domestic securities.
o Review current daily security trades for dividend activity.
o Interface with Custodian to monitor timely collection and
postings of corporate actions, dividends and interest.
o Process international dividend and capital change information
received from the Custodian and Sage/Tso. Back-up information
on foreign dividends and corporate actions may also be
obtained from Muller Data Corporation or IDC (as pricing
agents for the Trust). o Provide mark-to-market analysis for
currency exchange rate fluctuations on unsettled dividends and
interest.
Series and Each Class
o Allocate Series dividend income and unrealized currency
gains/losses on dividends/interest to classes based upon value
of outstanding class shares.
A-2
<PAGE>
6) Enter All Security Trades on Investment Accounting System (IAS) based
-----------------------------------------------------------------
on written instructions from Sage/Tso.
Series Level
o Review system verification of trade and interest calculations.
o Verify settlement through the statements supplied by the
custodian statements.
o Maintain security ledger transaction reporting.
o Maintain tax lot holdings.
o Determine realized gains or losses on security trades.
o Provide complete broker commission reporting.
o Provide the Series foreign currency exchange rate realized and
unrealized gains/losses detail.
Series and Each Class
o Allocate all Series level realized and unrealized capital and
currency gains/losses to classes based upon value of class
outstanding shares.
7) Enter All Series Share Transactions on IAS:
-------------------------------------------
Each Class
o Process activity identified on reports supplied by the
Transfer Agent.
o Verify settlement through the statements supplied by the
Custodian.
o Reconcile to the Fund/Plan Services' Transfer Agent report
balances.
o Roll each classes' capital share values into the Series and
determine allocation percentages based upon the value of each
classes' outstanding shares to the Series total.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
-----------------------------------------------------------------------
(listing all asset, liability, equity, income and expense accounts)
Series Level
o Post manual entries to the general ledger.
o Post Custodian bank activity.
o Post shareholder and security transactions.
o Post and verify system generated activity, i.e., income and
expense accruals.
o Segregate foreign tax expense.
o Prepare daily mark-to-market analysis for all unrealized
foreign currency exchange rate gains/losses by asset/liability
category.
Series and Each Class
o Prepare Series general ledger net cash proof used in NAV
calculation.
o Post class specific shareholder activity and roll values into
the Series.
o Allocate all Series level net cash accounts on the Series
Trial Balance to each specific class based upon value of class
outstanding shares.
o Maintain allocated Trial Balance accounts on class specific
Allocation Reports.
o Maintain class-specific expense accounts.
o Prepare class-specific proof/control reports to ensure
accuracy of allocations.
A-3
<PAGE>
9) Review and Reconcile With Custodian Statements:
-----------------------------------------------
Series Level
o Verify all posted interest, dividends, expenses, and
shareholder and security payments/receipts, etc.
(Discrepancies will be reported to and resolved by the
Custodian.)
o Post all cash settlement activity to the Trial Balance.
o Reconcile to ending cash balance accounts.
o Clear IAS subsidiary reports with settled amounts.
o Track status of past due items and failed trades handled by
the Custodian.
10) Submission of Daily Accounting Reports to Sage/Tso: (Additional reports
---------------------------------------------------
readily available.) Series Level
o Portfolio Valuation (listing inclusive of holdings, costs,
market values, unrealized appreciation/depreciation and
percentage of portfolio comprised of each security.)
o Cash availability and 3-day cash projection report
Series and Each Class
o Series Trial Balance and Class Allocation Report
o NAV Calculation Report
Monthly Accounting Services
---------------------------
1) For each Series, full Financial Statement Preparation (automated
-----------------------------------------------------------
Statements of Assets and Liabilities, of Operations and of Changes in
Net Assets) and submission to Sage/Tso by 10th business day.
o Class specific capital share activity and expenses will also
be disclosed.
2) Submission of Monthly Automated IAS Reports to Sage/Tso:
-------------------------------------------------------
Series Level
o Security Purchase/Sales Journal
o Interest and Maturity Report
o Brokers Ledger (Commission Report)
o Security Ledger Transaction Report with Realized Gains/Losses
o Security Ledger Tax Lot Holdings Report
o Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
--------------------------------------------------------------
Series Level
o Report any security balance discrepancies to the custodian and
Sage/Tso.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
-----------------------------------------------------------------------
Accounts, such as:
---------
Series Level
o Security cost and realized gains/losses
o Interest/dividend receivable and income
A-4
<PAGE>
o Payable/receivable for securities purchased and sold
o Unrealized and realized currency gains/losses
Series and Each Class
o Payable/receivable for Series' shares; issued and redeemed
o Expense payments and accruals analysis
5) If Appropriate, Prepare and Submit to Sage/Tso:
-----------------------------------------------
Series Level
o Income by state reporting.
o Standard Industry Code Valuation Report.
o Alternative Minimum Tax Income segregation schedule.
Annual (and Semi-Annual) Accounting Services
--------------------------------------------
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. for the
Trust and each class during the year in accordance with standard audit
assistance requirements.
2) Provide N-SAR Reporting (Accounting Questions):
-----------------------------------------------
If applicable for the Trust and Classes, answer the following items: 2,
12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63,
64B, 71, 72, 73, 74, 75, and 76.
A-5
<PAGE>
ACCOUNTING SERVICES BASIC ASSUMPTIONS
FOR
SAGE/TSO TRUST
The Accounting Fees as set forth in Schedule "B" are based on the following
assumptions. To the extent these assumptions are inaccurate or requirements
change, fee revisions may be necessary.
Basic Assumptions:
- ------------------
1) Compliance reporting (Sub-Chapter "M") shall be maintained by the
Trust's Administrator.
2) It is assumed that the portfolio asset composition will be primarily
equity securities such as common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks and sponsored
and unsponsored American Depository Receipts, European Depository
Receipts or Global Depository Receipts. Initially, the Trust intends to
invest primarily in Depository Receipts. Annual portfolio turnover rate
shall not exceed 100%.
3) It is assumed that the Trust has a tax year-end which coincides with
its fiscal year-end. No additional accounting requirements are
necessary to identify or maintain book-tax differences. Accounting
Services Unit (ASU) does not provide security tax accounting which
differs from its book accounting.
ASU will supply segregated Trial Balance account details to assist the
Trust's administrator in proper identification by category of all
appropriate realized and unrealized currency gains/losses.
4) Fund/Plan's standard current pricing services for domestic equity,
bond, ADR and foreign securities will be used for pricing the
securities held in the Trust. Fund/Plan currently uses Reuters Inc.,
Muller Data or Interactive Data Corporation (IDC) for domestic equities
and listed ADR's. Muller Data Corporation, Telerate Systems, Inc. and
IDC are used for bonds, money markets, synthetic ADR's and foreign
issues. Bloomberg is also available for price research and backup.
It is expected that Muller Data Corporation would be the primary
foreign security pricing vendor for the Trust. Muller Data will supply
ASU with daily (spot) foreign exchange rates to be used in market value
calculations of non-US dollar denominated securities and currency
mark-to-market requirements. To the extent Muller Data or IDC are
unable to supply certain foreign security prices, they will be provided
by the Trust's investment adviser or a pricing source recommended by
the investment adviser. If appropriate, Telerate Systems, Inc. is
available for daily forward currency contract prices. ASU will be able
to supply the Trust with information on Muller's or IDC's sources of
exchange rates and ADR/foreign security prices.
A-6
<PAGE>
It is assumed that ASU will work closely with the Sage/Tso to ensure
the accuracy of the Trust's NAV and distribution rates and to obtain
the most satisfactory pricing sources and specific methodologies prior
to the actual start-up date. The Trust shall establish clear-cut
security variance procedures to minimize NAV and distribution rate
miscalculations.
5) To the extent the Trust requires daily security prices (limited in
number) from specific brokers for domestic or foreign securities, these
manual prices will be obtained by the Trust's investment adviser and
faxed to ASU by approximately 4:00 PM Eastern time for inclusion in the
NAV calculations. Sage/Tso will supply ASU with the appropriate pricing
contacts for these manual quotes.
6) To the extent the Trust will purchase/hold open-end registered
investment companies (RIC's), it will require procedural discussions
between ASU and Trust management clarifying the appropriate pricing and
dividend rate sources. Depending on the methodologies selected by the
Trust, additional fees may apply.
7) ASU will supply daily Portfolio Valuation Reports to the Trust's
investment adviser identifying current security positions,
original/amortized cost, security market values and changes in
unrealized appreciation/depreciation.
It will be the responsibility of the Trust's investment adviser to
review these reports and to promptly notify ASU of any possible
problems, trade discrepancies, incorrect security prices corporate
action/capital change information or exchange rate discrepancies that
could result in a misstated NAV.
8) Although the Trust may invest in the following it has no current
intention to invest in the following securities: Futures, Derivatives,
Foreign Currency Options and Futures, Hedges or Forward Currency
Contracts. Spot Contracts that are directly related to security trades
and interest/dividend payments are included in our fees and should not
be considered an additional expense. To the extent these investment
strategies should change, additional fees will apply after the
appropriate procedural discussions have taken place between ASU and
Trust management. (Two weeks advance notice is required should the
Trust commence trading in the above investments.)
9) All foreign currency will be held within the custodian and
sub-custodian network. Time deposits and interest bearing currency
accounts will all be reflected on the Trust's custodian asset listings.
The Trust or custodian will supply ASU with appropriate and timely
information for any trades/changes in the currency accounts, as well as
interest rates to ensure income accrual accuracy for the debt issues,
time deposits, and currency accounts. Income accrual adjustments
(expected to be immaterial) will be completed when the interest is
actually collected and posted on the custodian's statements.
10) It is assumed for all debt issues that the investment adviser will
supply ASU with critical income information such as accrual methods,
interest payment frequency details, coupon payment dates, floating rate
reset dates, and complete security descriptions with issue types and
Sedol/CUSIP numbers. If applicable, for proper
A-7
<PAGE>
income accrual accounting, ASU will look to the Trust's investment
adviser to supply the yield to maturity and related cash flow schedules
for any mortgage/asset-backed securities held in the Trust.
11) The Trust shall direct the custodian to provide ASU with daily
custodian statements (or on-line access to the custody system)
reflecting all prior day cash activity on behalf of the Trust by 8:30
AM Eastern time. Complete descriptions of any postings, inclusive of
Sedol/CUSIP numbers, interest/dividend payment dates, capital stock
details, expense authorizations, beginning/ending cash balances, etc.
will be provided by the custodian's reports or system.*
12) The Trust shall direct the custodian to supply the foreign dividend,
capital change information, and interest rate changes to ASU in a
timely manner. The investment adviser will supplement and support as
appropriate. If selected by the Trust and found to be appropriate, ASU
can receive supplemental capital change and dividend information on
foreign positions from Muller Data or IDC as the pricing vendors for
the Trust's foreign securities. *
13) The Trust shall direct the custodian to handle and report upon all
settlement problems, failed trades and resolve unsettled
dividends/interest/paydowns and capital changes. The custodian will
process all applicable capital change and foreign reclaim paperwork
based upon advice from the investment adviser. ASU agrees to supply
segregated Trial Balance reporting and supplemental reports to assist
in this process.*
* These Custody issues are addressed by Fund/Plan Custody staff when
Fund/Plan's Custody services are employed.
14) To the extent applicable, ASU will maintain on a daily basis US dollar
denominated qualified covered call options and index options reporting
on the daily Trial Balance and value the respective options and
underlying positions. This proposal does not provide for tax
classifications if they are required.
If the Trust commences investment in domestic options or designated
hedges, two weeks advance notice is required to clarify operational
procedures between ASU and the investment adviser.
15) To the extent that the Trust should establish a Line of Credit in
segregated accounts with the custodian for temporary administrative
purposes, and/or leveraging/hedging the portfolio, it is not the
responsibility under this contract for ASU to complete the appropriate
paperwork/monitoring for segregation of assets and adequacy of
collateral. The Trust shall direct the investment adviser to execute
such responsibilities. ASU will, however, reflect appropriate Trial
Balance account entries and interest expense accrual charges on the
daily Trial Balance adjusting as necessary at month-end.
16) If the Trust commences participation in Security Lending, Leveraging,
Swaps or Short Sales within their portfolio securities, additional fees
will apply. (Two weeks advance notice to ASU is required should the
Trust desire to participate in the above.)
A-8
<PAGE>
17) The Trust shall direct the investment adviser or the Trust's
Administrator to supply ASU with portfolio specific expense accrual
procedures and monitor the expense accrual balances for adequacy based
on outstanding liabilities monthly. The Administrator will promptly
communicate to ASU any adjustments needed.
18) Specific deadlines shall be met and complete information shall be
supplied by the Trust in order to minimize any settlement problems, NAV
miscalculations or income accrual adjustments.
The Trust shall direct the investment adviser to provide to ASU Trade
Authorization Forms, with the appropriate officer's signature on all
security trades placed by the Trust no later than 12:30 PM Eastern time
on settlement/value date for short term money market securities issues
(assuming that trade date equals settlement date); and by 11:00 AM
Eastern time on trade date plus one for non-money market securities.
Receipt by ASU of trade information within these identified deadlines
may be via telex, fax, or on-line system access. The investment adviser
will communicate all trade information directly to the custody
administrator. The investment adviser and/or custody administrator will
supply ASU with the trade details in accordance with the above stated
deadlines.
The Trust shall direct the investment adviser to include all
information required by ASU; including CUSIP numbers and/or ticker
symbols for all US dollar denominated trades and Sedol numbers for all
foreign trades on the Trade Authorization, telex or on-line support.
ASU will supply the investment adviser with recommended trade ticket
documents to minimize receipt of incomplete information. ASU will not
be responsible for NAV changes or distribution rate adjustments that
result from incomplete trade information.
19) To the extent the Trust utilizes Purchases In-Kind (U.S. dollar
denominated securities only) as a method for shareholder subscriptions,
ASU will provide the Trust with procedures to properly handle and
process securities in-kind. Should the Trust prefer procedures other
than those provided by ASU, additional fees may apply. Discussions
should take place at least two weeks in advance between ASU and the
Trust to clarify the appropriate In-Kind operational procedures to be
followed.
20) It is assumed that the Trust's investment adviser or Administrator will
complete the applicable performance and rate of return calculations as
required by the SEC for the Trust.
21) It is assumed that Fund/Plan Services will provide Transfer Agency and
Custody Administration Services.
22) The Parties shall establish mutually agreed upon amortization
procedures and accretion requirements for debt issues held by the Fund
prior to commencement of operations. Adjustments for financial
statements regarding any issues with Original Issue Discount (OID) are
not included under this agreement. The Fund shall direct its
independent
A-9
<PAGE>
auditors to complete the necessary OID adjustments for financial
statements and/or tax reporting.
A-10
<PAGE>
SCHEDULE "B"
------------
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES FEE SCHEDULE
FOR
SAGE/TSO TRUST
This Fee Schedule is fixed for a period of two (2) years from the Effective Date
as that term is defined in the Agreement.
The Accounting Fees as set forth below are stated and offered subject to the
"Basic Assumptions" as set forth in Schedule "A." To the extent that those
assumptions are inaccurate or requirements change, fee
revisions may be necessary.
I. Annual Fee Schedule Per Domestic Portfolio (US Dollar Denominated
Securities Only)(1/12th payable monthly in advance based on the prior
month's average daily combined classes' net assets and number of
portfolios):
$30,000 Minimum to $ 20 Million of Combined Class A and D Average Net Assets
.0004 On the Next $ 30 Million of Combined Class A and D Average Net Assets
.0003 On the Next $ 50 Million of Combined Class A and D Average Net Assets
.0001 Over $100 Million of Combined Class A and D Average Net Assets
Additional Class is $12,000 minimum per year.
IF THE TRUST PURCHASES MORE THAN FIVE FOREIGN SECURITIES,
THE ANNUAL GLOBAL FEE SCHEDULE BELOW WILL BECOME EFFECTIVE
II. Annual Fee Schedule Per Global Portfolio (1/12th payable monthly in
advance based on the prior month's average daily combined classes' net
assets and number of portfolios):
$40,000 Minimum to $ 20 Million of Combined Class A and D Average Net Assets
.0004 On the Next $ 30 Million of Combined Class A and D Average Net Assets
.0003 On the Next $ 50 Million of Combined Class A and D Average Net Assets
.0001 Over $100 Million of Combined Class A and D Average Net Assets
Additional class is $12,000 minimum per year.
III. Pricing Services Quotation Fee (based on individual CUSIP or security
identification number.) Specific costs will be identified based upon
options selected by Sage/Tso and will be billed monthly.
B-1
<PAGE>
III. Pricing Vendor Fees (Cont'd)
-------------------
<TABLE>
<CAPTION>
Muller Data Interactive
Security Types Corp.* Data Corp.* Kenny S&P*
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
Mortgage-Backed (evaluated, seasoned, closing) .50 .50 .25 (a)
Corporate Bonds (short and long term) .50 .50 .25 (a)
U.S. Municipal Bonds (short and long term) .55 .80 .50 (b)
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
Convertible Bonds .50 .50 1.00 (a)
High Yield Bonds .50 .50 1.00 (a)
Mortgage-Backed Factors (per Issue per Month) 1.00 n/a n/a
Domestic Equities (d)* .15 n/a
Domestic Options n/a .15 n/a
Domestic Dividends & Capital Changes (d)* 3.50 n/a
(per Issue per month)
Foreign Securities .50 .50 n/a
Foreign Securities Dividends & Capital Changes
(per Issue per Month) 2.00 4.00 n/a
Set-up Fees n/a n/a .25 (c)
All Added Items n/a n/a .25 (c)
<FN>
* Based on current Vendor costs, subject to change. Costs are
quoted based on individual security CUSIP/identifiers and are
per issue per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to Fund/Plan clients
A) Futures and Currency Forward Contracts $2.00 per Issue per Day
B) Telerate Systems, Inc.* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
Sage/Tso and will be billed monthly.
C) Reuters, Inc.*
*Based on current vendor costs, subject to change.
Fund/Plan does not currently pass along the charges for the
domestic security prices supplied by Reuters, Inc.
</FN>
</TABLE>
B-2
<PAGE>
IV. SEC Yield Calculation: (if applicable)
----------------------
Provide up to 12 reports per year to reflect the yield calculations
for non-money market Funds required by the SEC, $1,000 per year per
Fund. For multiple class Funds, $1,000 per year per class. Daily SEC
yield reporting is available at $3,000 per year per Fund (US dollar
denominated securities only).
V. Out-of-Pocket Expenses
----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all
reasonable out-of-pocket expenses including telephone, postage, EDGAR
filings, telecommunications, special reports, record retention,
special transportation costs, copying and sending materials to
auditors, as incurred and approved.
VI. Additional Services
--------------------
To the extent the Trust commences using investment techniques such as
Futures, Security Lending, Swaps, Short Sales, Derivatives,
Leveraging, Precious Metals or non-US dollar denominated futures and
options, additional fees will apply. Activities of a non-recurring
nature such as shareholder in-kinds, fund consolidations, mergers or
reorganizations will be subject to negotiation. Any
additional/enhanced services or reports will be quoted upon request.
This Schedule may be amended to reflect the addition of other reports and/or
services.
B-3
<PAGE>
SCHEDULE "C"
------------
Identification of Series
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Sage/Tso Trust"
1. America Asia Allocation Growth Fund - Class A Shares
2. America Asia Allocation Growth Fund - Class D Shares
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
[Kirkpatrick & Lockhart LLP]
[1800 Massachusetts Avenue, N.W.]
[Washington, DC 20036-1800]
June 18, 1996
Sage/Tso Trust
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
To the Board of Trustees:
Sage/Tso Trust (the "Trust") is a business trust organized under the
laws of the State of Delaware and governed by a Trust Instrument dated February
9, 1996. The Trust is an open-end diversified management investment company
which proposes to offer shares in an investment company called the American Asia
Allocation Growth Fund (the "Fund"). You have requested our opinion regarding
certain matters in connection with the issuance of shares of the Trust.
As legal counsel to the Trust, we have participated in various business
and other proceedings relating to the formation of the Trust and the Fund. We
have examined copies of the Trust Instrument and the Trust's By-Laws and the
minutes of meetings of the trustees of the Trust and other documents relating to
its organization, and we are generally familiar with its business affairs. For
certain matters of fact, we have relied upon the representation of certain
officers of the Trust.
Based upon the foregoing, we are of the opinion that the unlimited
number of shares of the Trust being registered may be legally and validly issued
in accordance with the Trust's Declaration of Trust and By-Laws; and, when so
issued, the shares will be legally issued, fully paid and non-assessable by the
Trust.
The Trust is a business trust established pursuant to the Delaware
Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the Trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent the
Trust or any of its shareholders become subject to the jurisdiction of courts in
states which do not have statutory or other authority limiting the liability of
business trust shareholders, such courts might not apply the Delaware Act and
could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument (i) provides that
every written obligation may be enforced only against the assets of the Trust,
but also states that the omission of such a disclaimer will not operate to
create personal liability for any shareholder; and (ii) provides for
indemnification out of Trust property of any shareholder held personally liable
to the Trust. Thus, the risk of a Trust shareholder incurring financial loss
beyond his or her investment solely by reason of being a shareholder is limited
to circumstances in which (i) a court refuses to apply
<PAGE>
Delaware law; (ii) no contractual limitation of liability was in effect; and
(iii) the Trust itself would be unable to meet its obligations.
We express no opinion as to compliance with the Securities Act of 1933,
as amended, the Investment Company Act of 1940, as amended, or applicable state
laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion in connection with
Pre-Effective Amendment No. 2 to the Trust's Registration Statement on Form N-1A
(File No. 333-01973) to be filed with the Securities and Exchange Commission. We
also consent to the reference of our firm under the caption "Legal Counsel" in
the Fund's Statement of Additional Information.
Very truly yours,
/s/ Clifford J. Alexander
-------------------------
Clifford J. Alexander
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this pre-effective amendment
No. 2 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated June 25, 1996,
relating to the statement of assets and liabilities of
America Asia Allocation Growth Fund (constituting Sage/Tso
Trust), which appears in such Statement of Additional
Information, and to the incorporation by reference of our
report into the Prospectus which constitutes part of this
registration statement.
PRICE WATERHOUSE LLP
Philadelphia, PA
June 25, 1996
<PAGE>
June 26, 1996
Securities & Exchange Commission
Division of Investment Management
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, DC 20549
RE: Sage/Tso Trust - America Asia Allocation Growth Fund
File No 811-07573
-----------------------------------------------------
To whom it may concern:
I, James C. Tso, managing partner of Sage/Tso Investment Management L.P.,
propose to acquire:
20,000 shares of common stock of Class D Shares (the "Shares") of America
Asia Allocation Growth Fund (the "Fund") at a purchase price of $5.00 per
share.
These Shares will be issued in a private offering prior to the effectiveness of
the Registration Statement filed on Form N-1A by Sage/Tso Trust under the
Securities Act of 1933. The Shares are being purchased pursuant to Section 14 of
the Investment Act of 1940 to serve as the seed money for the Fund prior to the
commencement of the public offering of its shares.
In connection with such purchase, I understand that: (i) as the purchaser, I
intend to acquire the Shares for my own account, held jointly with my wife
Yvonne Lee Tso, as sole beneficial owners thereof and have no present intention
of redeeming or reselling the Shares so acquired; and (ii) in the event any of
the initial 20,000 Shares are redeemed during the first five years, the Fund may
charge against my redemption proceeds a pro rata portion of any unamortized
organizational expenses which would be borne by such Shares during the balance
of the initial five year period were they not redeemed.
I consent to the filing of this Investment Letter as an exhibit to the Form N-1A
Registration Statement of the Fund.
Sincerely,
/s/ James C. Tso /s/ Yvonne Lee Tso
- ----------------------- --------------------------
James C. Tso Yvonne Lee Tso
Sage/Tso Investment Management L.P.
7799 Leesburg Pike, Suite 900
Falls Church, VA 22043
<PAGE>
EXHIBIT 99.15a
<PAGE>
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
FOR
AMERICA ASIA ALLOCATION GROWTH FUND - CLASS A
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") by
Sage/Tso Trust (the "Trust") on behalf of the Class A Shares of America Asia
Allocation Growth Fund (the "Fund"), for the use of Class A Shares of the Fund.
The Plan has been approved by a majority of the Trust's Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan (the "non-interested trustees"), cast in person at a meeting called for the
purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that adoption of the
Plan would be prudent and in the best interests of the Fund and its
shareholders. Such approval included a determination, in the exercise of their
reasonable business judgement and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has also been approved by a vote of the initial shareholder of Class A
Shares of the Fund.
Section 1. Subject to Section 11 of this Plan, the Fund shall pay Fund/Plan
Broker Services, Inc. (the "Distributor") a fee in an amount not to exceed, on
an annual basis, 0.35% of the average daily net assets of the Fund (the "Fee"),
to compensate the Distributor for the following: (i) payments the Distributor
makes to itself, other institutions and industry professionals, broker-dealers,
including the Adviser, and the affiliates or subsidiaries of each (collectively
referred to as "Participating Organizations"), pursuant to an agreement
regarding the provision of administrative support services to the holders of a
Fund's shares; (ii) payments to financial institutions and industry
professionals (such as insurance companies, investment counselors, accountants
and estate planning firms (but not including banks and savings and loan
associations), broker-dealers, the Distributor and the Distributor's affiliates
and subsidiaries in consideration for distribution services provided and
expenses assumed in connection with distribution assistance, including, but not
limited to, printing and distributing prospectuses to persons other than current
shareholders of the Fund, printing and distributing advertising and sales
literature and reports to shareholders in connection with the sale of the Fund's
shares, and personnel and communication equipment used in servicing shareholder
accounts and prospective shareholder inquiries; or (iii) payments to the
Distributor pursuant to the Underwriting Agreement between the Trust and the
Distributor.
Section 2. The Fee shall be accrued daily and payable monthly, and shall be paid
by the Fund to the Distributor to compensate the Distributor for payments made
pursuant to Section 1, irrespective of whether such fee exceeds the amounts paid
(or payable) by the Distributor.
Section 3. The Plan shall not take effect with respect to the Fund until it has
been approved by a vote of at least a majority of the outstanding voting
securities of the Fund.
Section 4. The Plan shall not take effect until it, together with any related
agreements, has
1
<PAGE>
been approved, together with any related agreements, by votes of a majority of
both (a) the Board of Trustees of the Trust and (b) the "Disinterested Trustees"
(as defined below) cast in person at a meeting called for the purpose of voting
on the Plan or such agreement.
Section 5. This Plan shall become effective as to the Fund on the date that a
majority of the outstanding voting securities (as defined below) of the Fund
approve the Plan, and shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually in
the manner provided for approval of the Plan in Section 4, unless earlier
terminated in accordance with the terms hereof.
Section 6. The Distributor shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to Section 1 and the purposes for which such expenditures were
made.
Section 7. The Plan may be terminated with respect to the Fund, without payment
of any penalty, at any time by vote of a majority of the disinterested trustees
or by vote of a majority of the outstanding voting securities of the Fund.
Section 8. Payments by the Distributor to a Participating Organization shall be
subject to compliance by the Participating Organization with the terms of an
agreement with the Distributor. All agreements with any person relating to
implementation of the Plan shall be in writing, and any agreement related to the
Plan shall provide:
A. That such agreement may be terminated with respect to the Fund
at any time, without payment of any penalty, by vote of a
majority of the Disinterested Trustees, or by vote of a
majority of the outstanding voting securities of the Fund, on
not more than 60-days' written notice; and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 9. The Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof with respect to the
Fund without approval in the manner provided in Sections 3 and 4 hereof, and all
material amendments to the Plan shall be approved in the manner provided for
approval of the Plan in Section 4.
Section 10. Any person authorized to direct the disposition of monies paid or
payable by the Trust pursuant to this Agreement shall provide to the Distributor
and the Board of Trustees of the Trust or its designees, and the Board will
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made. In addition, each Participating
Organization shall furnish the Trust or its designees with such information as
may be reasonably requested (including, without limitation, periodic
certifications confirming the provision to Customers of the services described
herein) and will otherwise cooperate with the Trust or its designees (including,
without limitation, any auditors designated by the Trust or the Distributor), in
connection with the preparation of reports to the Board of Trustees concerning
this Agreement and the monies paid or payable by the Trust pursuant hereto, as
well as any other reports or filing that may be required by law.
2
<PAGE>
Section 11.
(a) The monthly payments to the Distributor under this Plan shall be
made in accordance with, and subject to, the following conditions:
(i) that payments made out of or charged against the assets of
the Fund must be in payment for services rendered on behalf of the
Fund; and
(ii) that payments of the Fee by the Fund pursuant to this
Plan will be reduced to the extent necessary to ensure that the amount
of the Fee and any other operating expenses that are accrued on any day
with respect to the Fund will not exceed the gross income accrued with
respect to the Fund on that day (with written notice at the time of
payment to a Participating Organization).
(b) For the purposes of determining the amounts payable under this
Plan, the value of the Fund's net assets shall be computed in the manner
specified in the Fund's current Prospectus as then in effect.
Section 12. As used herein, (a) the term "Disinterested Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it and (b) the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have the respective meanings specified in the Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
Section 13. Pursuant to Section 2.10 of the Trust Instrument dated February 9,
1996 and as filed with the Secretary of State of the State of Delaware, the
obligations of the Trust stated under this Plan are limited to the assets of the
Trust or Fund, as the case may be, and each Shareholder of the Trust and of each
Series shall not be personally liable for any debts, liabilities, obligations
and expenses arising hereunder.
Sage/Tso Trust - America Asia Allocation Fund/Plan Broker Services, Inc.
- ---------------------------------------- -------------------------------
Growth Fund - Class A Shares
- ----------------------------
- ------------------------------------ ------------------------------------
By: James C. Tso, President By: Kenneth J. Kempf, President
- ------------------------------------ ------------------------------------
Attest: , Secretary Attest: Mary P. Efstration, Secretary
(SEAL) (SEAL)
<PAGE>
EXHIBIT 99.15b
<PAGE>
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
FOR
AMERICA ASIA ALLOCATION GROWTH FUND - CLASS D
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") by
Sage/Tso Trust (the "Trust") on behalf of the Class D Shares of America Asia
Allocation Growth Fund (the "Fund"), for the use of Class D Shares of the Fund.
The Plan has been approved by a majority of the Trust's Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan (the "non-interested trustees"), cast in person at a meeting called for the
purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that adoption of the
Plan would be prudent and in the best interests of the Fund and its
shareholders. Such approval included a determination, in the exercise of their
reasonable business judgement and in light of their fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has also been approved by a vote of the initial shareholder of Class D
Shares of the Fund.
Section 1. Subject to Section 11 of this Plan, the Fund shall pay Fund/Plan
Broker Services, Inc. (the "Distributor") a fee in an amount not to exceed, on
an annual basis, 0.35% of the average daily net assets of the Fund (the "Fee"),
to compensate the Distributor for the following: (i) payments the Distributor
makes to itself, other institutions and industry professionals, broker-dealers,
including the Adviser, and the affiliates or subsidiaries of each (collectively
referred to as "Participating Organizations"), pursuant to an agreement
regarding the provision of administrative support services to the holders of a
Fund's shares; (ii) payments to financial institutions and industry
professionals (such as insurance companies, investment counselors, accountants
and estate planning firms (but not including banks and savings and loan
associations), broker-dealers, the Distributor and the Distributor's affiliates
and subsidiaries in consideration for distribution services provided and
expenses assumed in connection with distribution assistance, including, but not
limited to, printing and distributing prospectuses to persons other than current
shareholders of the Fund, printing and distributing advertising and sales
literature and reports to shareholders in connection with the sale of the Fund's
shares, and personnel and communication equipment used in servicing shareholder
accounts and prospective shareholder inquiries; or (iii) payments to the
Distributor pursuant to the Underwriting Agreement between the Trust and the
Distributor.
Section 2. The Fee shall be accrued daily and payable monthly, and shall be paid
by the Fund to the Distributor to compensate the Distributor for payments made
pursuant to Section 1, irrespective of whether such fee exceeds the amounts paid
(or payable) by the Distributor.
Section 3. The Plan shall not take effect with respect to the Fund until it has
been approved by a vote of at least a majority of the outstanding voting
securities of the Fund.
Section 4. The Plan shall not take effect until it, together with any related
agreements, has
1
<PAGE>
been approved, together with any related agreements, by votes of a majority of
both (a) the Board of Trustees of the Trust and (b) the "Disinterested Trustees"
(as defined below) cast in person at a meeting called for the purpose of voting
on the Plan or such agreement.
Section 5. This Plan shall become effective as to the Fund on the date that a
majority of the outstanding voting securities (as defined below) of the Fund
approve the Plan, and shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually in
the manner provided for approval of the Plan in Section 4, unless earlier
terminated in accordance with the terms hereof.
Section 6. The Distributor shall provide to the Trustees of the Trust, and the
Trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to Section 1 and the purposes for which such expenditures were
made.
Section 7. The Plan may be terminated with respect to the Fund, without payment
of any penalty, at any time by vote of a majority of the disinterested trustees
or by vote of a majority of the outstanding voting securities of the Fund.
Section 8. Payments by the Distributor to a Participating Organization shall be
subject to compliance by the Participating Organization with the terms of an
agreement with the Distributor. All agreements with any person relating to
implementation of the Plan shall be in writing, and any agreement related to the
Plan shall provide:
A. That such agreement may be terminated with respect to the Fund
at any time, without payment of any penalty, by vote of a
majority of the Disinterested Trustees, or by vote of a
majority of the outstanding voting securities of the Fund, on
not more than 60-days' written notice; and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 9. The Plan may not be amended to increase materially the amount of
distribution expenses permitted pursuant to Section 1 hereof with respect to the
Fund without approval in the manner provided in Sections 3 and 4 hereof, and all
material amendments to the Plan shall be approved in the manner provided for
approval of the Plan in Section 4.
Section 10. Any person authorized to direct the disposition of monies paid or
payable by the Trust pursuant to this Agreement shall provide to the Distributor
and the Board of Trustees of the Trust or its designees, and the Board will
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made. In addition, each Participating
Organization shall furnish the Trust or its designees with such information as
may be reasonably requested (including, without limitation, periodic
certifications confirming the provision to Customers of the services described
herein) and will otherwise cooperate with the Trust or its designees (including,
without limitation, any auditors designated by the Trust or the Distributor), in
connection with the preparation of reports to the Board of Trustees concerning
this Agreement and the monies paid or payable by the Trust pursuant hereto, as
well as any other reports or filing that may be required by law.
2
<PAGE>
Section 11.
(a) The monthly payments to the Distributor under this Plan shall be
made in accordance with, and subject to, the following conditions:
(i) that payments made out of or charged against the assets of
the Fund must be in payment for services rendered on behalf of the
Fund; and
(ii) that payments of the Fee by the Fund pursuant to this
Plan will be reduced to the extent necessary to ensure that the amount
of the Fee and any other operating expenses that are accrued on any day
with respect to the Fund will not exceed the gross income accrued with
respect to the Fund on that day (with written notice at the time of
payment to a Participating Organization).
(b) For the purposes of determining the amounts payable under this
Plan, the value of the Fund's net assets shall be computed in the manner
specified in the Fund's current Prospectus as then in effect.
Section 12. As used herein, (a) the term "Disinterested Trustees" shall mean
those Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it and (b) the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have the respective meanings specified in the Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
Section 13. Pursuant to Section 2.10 of the Trust Instrument dated February 9,
1996 and as filed with the Secretary of State of the State of Delaware, the
obligations of the Trust stated under this Plan are limited to the assets of the
Trust or Fund, as the case may be, and each Shareholder of the Trust and of each
Series shall not be personally liable for any debts, liabilities, obligations
and expenses arising hereunder.
Sage/Tso Trust - America Asia Allocation Fund/Plan Broker Services, Inc.
- ---------------------------------------- -------------------------------
Growth Fund - Class A Shares
- ----------------------------
- ------------------------------------ ------------------------------------
By: James C. Tso, President By: Kenneth J. Kempf, President
- ------------------------------------ ------------------------------------
Attest: , Secretary Attest: Mary P. Efstration, Secretary
(SEAL) (SEAL)
3
<PAGE>
EXHIBIT 99.18
<PAGE>
SAGE/TSO TRUST
America Asia Allocation Growth Fund
Multiple Class Plan Pursuant to Rule 18F-3
America Asia Allocation Growth Fund (the "Fund") hereby adopts this Multiple
Class Plan (the "Plan") pursuant to Rule 18f-3 under the Investment Company Act
of 1940, as amended (the "1940 Act"), which sets forth the separate distribution
arrangements and expense allocations of each class of the Fund. This Plan has
been adopted by a majority of the Board of Trustees, including a majority of the
independent Trustees, of Sage/Tso Trust (the "Trust"). The Board has determined
that the Plan is in the best interests of each class and the Fund as a whole.
CLASS CHARACTERISTICS
Each class of shares will represent interest in the same portfolio of
investments and be identical in all respects to each other class, except as set
forth below.
Class A Shares: Class A Shares are sold subject to a front-end sales charge of
5.00% for an investment less than $100,000, 4.50% for
investments over $100,000 but less than $200,000, 4.00% for
investments over $200,000 but less than $300,000, 3.50% for
investments over $300,000 but less than $500,000, 2.50% for
investments over $500,000 but less than $1,000,000 and 1.50%
for investments $1,000,000 and over. Class A Shares are
subject to Rule 12b-1 distribution charges with a fee of 0.35%
per annum of the average daily net assets of Class A Shares.
Class D Shares: Class D Shares are offered for sale at net asset value per
share without a sales charge. Class D Shares are sold subject
to a minimum initial investment of $10,000 and subsequent
investments of $200 or more. Class D Shares are subject to
Rule 12b-1 distribution charges with a fee of 0.35% per annum
of the average daily net assets of Class D Shares.
The Rule 12b-1 charges associated with the Class A Shares and Class D Shares
shall be paid to Fund/Plan Broker Services, Inc. (the "Distributor") for (i)
expenses incurred pursuant to an agreement regarding the provision of
administrative support services to the holders of the respective class of
shares; (ii) distribution services provided and expenses assumed in connection
with distribution assistance, including, but not limited to, printing and
distributing prospectuses to persons other than current shareholders of the
Fund, printing and distributing advertising and sales literature and reports to
shareholders in connection with the sale of the Fund's shares, and personnel and
communication equipment used in servicing shareholder accounts and prospective
shareholder inquiries; or (iii) payments to the Distributor pursuant to the
Underwriting Agreement between the Trust and the Distributor. The Distributor
may reallow a portion or all of the 12b-1 fees received to broker-dealers or
others who have
<PAGE>
executed a selling agreement with the Distributor on behalf of the respective
class of shares of the Trust.
INCOME AND EXPENSE ALLOCATION
Certain expenses attributable to the Fund, and not to a particular
class will be borne by each class on the basis of the relative aggregate net
assets of the Fund. Notwithstanding the foregoing, the investment manager or
other service provider may waive or reimburse the expenses of a specific class
or classes to the extent permitted under Rule 18f-3 under the 1940 Act.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each class of shares, to the
extent that any dividends are paid, will be calculated in the same manner, at
the same time, on the same day, and will be in the same amount, except that any
distribution fees, service fees and class expenses allocated to a class will be
borne exclusively by that class.
EXCHANGES AND CONVERSIONS
There shall be no exchange or conversion features associated with the
Class A Shares or the Class D Shares.
GENERAL
The Fund's Rule 12b-1 Plans relating to the Class A Shares and Class D
Shares shall operate in accordance with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., Article III, Section 26.
Each Class shall vote separately and exclusively with respect to any
matter related to the respective Rule 12b-1 Plan. Each Class shall vote
separately with respect to any matter that relates solely to that Class.
On an ongoing basis, the Trustees, pursuant to their fiduciary
responsibilities under the 1940 Act, and otherwise, will monitor the Trust for
the existence of any material conflicts between the interests of the classes of
shares. The Trustees, including a majority of the independent Trustees, shall
take such action as is reasonably necessary to eliminate any such conflict that
may develop. The investment adviser and the distributor shall be responsible for
alerting the Board to any material conflicts that may arise.
Any material amendment to this Plan must be approved by a majority of
the Trustees of the Fund, including a majority of the Trustees who are not
interested persons of the Fund, as defined in the 1940 Act.
Date: , 1996
----------------
<PAGE>
EXHIBIT 99.19
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq.,
Joseph M. O'Donnell, Esq. and Gretchen B. Zepernick and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact and agent,
with full and several power of substitution, to take any appropriate action to
execute any amendment to the registration statement of Sage/Tso Trust (the
"Trust"), file for exemptive orders or to qualify or register all or part of the
securities of the Trust for sale in various states, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of any such state, and in
connection therewith to execute and file all requisite papers and documents,
including but not limited to, applications, reports, surety bonds, irrevocable
consents and appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 15th day of June, 1996.
/s/ William L. Fang
------------------------------
William L. Fang, Trustee,
Secretary and Treasurer
ACKNOWLEDGEMENT
---------------
State of )
-------------- ) ss:
County of )
-------------
The foregoing instrument was acknowledged before me this day of June,
1996, by William L. Fang, Trustee, Secretary and Treasurer of Sage/Tso Trust.
- -------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq.,
Joseph M. O'Donnell, Esq. and Gretchen B. Zepernick and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact and agent,
with full and several power of substitution, to take any appropriate action to
execute any amendment to the registration statement of Sage/Tso Trust (the
"Trust"), file for exemptive orders or to qualify or register all or part of the
securities of the Trust for sale in various states, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of any such state, and in
connection therewith to execute and file all requisite papers and documents,
including but not limited to, applications, reports, surety bonds, irrevocable
consents and appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 15th day of June, 1996.
/s/ Dr. Stuart E. Malawer
------------------------------
Dr. Stuart E. Malawer, Trustee
ACKNOWLEDGEMENT
---------------
State of )
------------ ) ss:
County of )
----------
The foregoing instrument was acknowledged before me this day of June,
1996, by Dr. Stuart E. Malawer, Trustee of Sage/Tso Trust.
- ---------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq.,
Joseph M. O'Donnell, Esq. and Gretchen B. Zepernick and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact and agent,
with full and several power of substitution, to take any appropriate action to
execute any amendment to the registration statement of Sage/Tso Trust (the
"Trust"), file for exemptive orders or to qualify or register all or part of the
securities of the Trust for sale in various states, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of any such state, and in
connection therewith to execute and file all requisite papers and documents,
including but not limited to, applications, reports, surety bonds, irrevocable
consents and appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 15th day of June, 1996.
/s/ John N. Paden
-------------------------
John N. Paden, Trustee
ACKNOWLEDGEMENT
---------------
State of )
-------------- ) ss:
County of )
-------------
The foregoing instrument was acknowledged before me this day of June,
1996, by John N. Paden, Trustee of Sage/Tso Trust.
- --------------------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq.,
Joseph M. O'Donnell, Esq. and Gretchen B. Zepernick and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact and agent,
with full and several power of substitution, to take any appropriate action to
execute any amendment to the registration statement of Sage/Tso Trust (the
"Trust"), file for exemptive orders or to qualify or register all or part of the
securities of the Trust for sale in various states, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of any such state, and in
connection therewith to execute and file all requisite papers and documents,
including but not limited to, applications, reports, surety bonds, irrevocable
consents and appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 15th day of June, 1996.
/s/ Patricia A. Shelton
--------------------------------
Patricia A. Shelton, Trustee,
ACKNOWLEDGEMENT
---------------
State of ____________ )
) ss:
County of __________ )
The foregoing instrument was acknowledged before me this day of June,
1996, by Patricia A. Shelton, Trustee of Sage/Tso Trust.
- --------------------------------------------
Notary Public
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints William J. Baltrus, Gerald J. Holland, Carolyn F. Mead, Esq.,
Joseph M. O'Donnell, Esq. and Gretchen B. Zepernick and each of them, with full
power to act without the other, as a true and lawful attorney-in-fact and agent,
with full and several power of substitution, to take any appropriate action to
execute any amendment to the registration statement of Sage/Tso Trust (the
"Trust"), file for exemptive orders or to qualify or register all or part of the
securities of the Trust for sale in various states, to perform on behalf of the
Trust any and all such acts as such attorneys-in-fact may deem necessary or
advisable in order to comply with the applicable laws of any such state, and in
connection therewith to execute and file all requisite papers and documents,
including but not limited to, applications, reports, surety bonds, irrevocable
consents and appointments of attorneys for service of process; granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act requisite and necessary to be done in connection
therewith, as fully as each might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 15th day of June, 1996.
/s/ James C. Tso
-----------------------------
James C. Tso, President
ACKNOWLEDGEMENT
---------------
State of )
------------------ ) ss:
County of )
-----------------
The foregoing instrument was acknowledged before me this day of June,
1996, by James C. Tso, President of Sage/Tso Trust.
- --------------------------------------------
Notary Public
<PAGE>
