SUNSTONE FINANCIAL GROUP, INC.
207 EAST BUFFALO STREET, SUITE 400
MILWAUKEE, WISCONSIN
53202
(414) 271-5885
September 26, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: The Purisima Funds
Filing of Pre-Effective Amendment No. 1
(File #333-9153; 811-7737)
Ladies and Gentlemen:
On behalf of The Purisima Funds (the "Trust"), and pursuant to the Investment
Company Act of 1940 and the Securities Act of 1933, we hereby file
Pre-Effective Amendment No. 1 to the Trust's Registration Statement on Form
N-1A. The filing relates to the Purisima Total Return Fund, the Trust's
initial portfolio. Also filed herewith is a memorandum addressing the
comments of the staff regarding the Trust's Registration Statement.
If you have questions or comments, please call the undersigned or, in my
absence, Connie Shannon at (414) 271-5885.
Very truly yours,
Sunstone Financial Group, Inc.
By: /s/ Randy M. Pavlick
- -------------------------
Vice President - Legal and Compliance Services
RMP/fd
Encl.
cc: Connie Shannon, Esq.
Kenneth L. Fisher
Clayton P. Fisher
Harold C. Warner
Mitchell E. Nichter, Esq.
THE PURISIMA FUNDS
(333-9153; 811-7737)
MEMORANDUM IN RESPONSE TO SEC COMMENTS
TO THE REGISTRATION STATEMENT ON FORM N-1A
This Memorandum is being filed in response to comments of the Staff with respect
to the Registration Statement on Form N-1A filed on behalf of The Purisima Funds
and its initial portfolio the Purisima Total Return Fund (the "Fund") as set
forth in the letter to Randy M. Pavlick from John Grezeskiewicz, dated August
28, 1996. Set forth below is a summary of each comment and the Registrant's
response thereto. Questions regarding any of the following responses and/or
additional comments should be directed to either Randy M. Pavlick or Connie
Shannon, Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin, 53202 (414) 271-5885.
1. COMMENT: Fill in all the blanks prior to filing the final pre-effective
amendment.
RESPONSE: All of the blanks have been completed in the accompanying Pre-
Effective Amendment No. 1 to the extent the information was
available at the time of filing.
2. COMMENT: Inform the staff of any exemptive applications and no-action
requests the Registrant has filed or will file in connection with
the registration of the Fund's shares.
RESPONSE: The Registrant has not nor does it currently anticipate filing
any exemptive applications or no-action requests in connection
with the registration of the Fund's shares.
3. COMMENT: Ensure that the prospectus will be in Roman type at least as
large and legible as 10-point modern type.
RESPONSE: The final prospectus will be in the type and size as required by
Rule 420 under the Securities Act of 1933, as amended.
4. COMMENT: If the Fund's shares are sold through banks, include the
disclosure set forth in the staff's Letter to Registrants dated
May 13, 1993.
RESPONSE: It is not presently contemplated that the Fund's shares will be
sold by or through banks.
5. COMMENT: If the investment adviser and Mr. Fisher have not had any
experience advising or managing mutual funds, their inexperience
should be described as a distinct risk.
RESPONSE: Fisher Investments, Inc. has served as investment adviser or sub-
adviser for two registered investment companies and Mr. Fisher,
as President of Fisher Investments, Inc., has served as
portfolio manager of these registered investment companies.
6. COMMENT: Supplementally explain to the staff the accounting treatment of
fees waived and expenses paid by the Adviser which may be
reimbursed by the Fund.
RESPONSE: The Investment Management Agreement permits the Fund's investment
adviser to seek reimbursement of any reductions made to its
management fee and payments made to limit expenses which are the
responsibility of the Fund within the three-year period following
such reduction or payment, subject to the Fund's ability to
effect such reimbursement and remain in compliance with
applicable expense limitations. Any such management fee or
expense reimbursement will be accounted for on the financial
statements of the Fund as a contingent liability of the Fund at
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. In any event, the accounting
treatment for fees waived and expense payments made by the
adviser which are subject to reimbursement by the Fund will be in
accordance with Statement of Financial Accounting Standards No. 5
and any Audit Guides adopted thereunder.
7. COMMENT: Information regarding the officers and the full board of trustees
should be included in the Statement of Additional Information.
RESPONSE: The Statement of Additional Information which is a part of Pre-
Effective Amendment No. 1 contains the information required by
Item 14 of Form N-1A for each officer and each person who will
serve initially as a Trustee of the Registrant. These Trustees
will be appointed at the meeting of the sole Trustee currently
scheduled for September 26, 1996 and by consent action of the
initial shareholder as of the same date. The compensation table
includes information regarding all trustees.
As filed with the Securities and Exchange Commission on September 26, 1996
Securities Act Registration No. 333-9153
Investment Company Act Registration No. 811-7737
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
Pre-Effective Amendment No. 1 x
Post-Effective Amendment No. ____ o
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 1 x
(Check appropriate box or boxes)
THE PURISIMA FUNDS
(Exact Name of Registrant as Specified in Charter)
13100 SKYLINE BOULEVARD
WOODSIDE, CALIFORNIA 94062-4547
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 851-7925
KENNETH L. FISHER
13100 Skyline Boulevard.
Woodside, California 94062-4547
(Name and Address of Agent for Service)
Copy to:
Mitchell E. Nichter, Esq.
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, California 94104-2878
Approximate Date of Proposed Public Offering: As soon as possible after this
Registration Statement becomes effective. In accordance with Rule 24-f-2(a)(1)
under the Investment Company Act of 1940, Registrant hereby declares that an
indefinite number of shares or amount of its Common Stock is being registered by
this Registration Statement.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
THE PURISIMA FUNDS
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A and
B of Form N-1A).
Caption or Subheading in Prospectus or
Item No. on Form N-1A Statement of Additional Information
- --------------------- --------------------------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Information <F1>
4. General Description of Registrant The Purisima Funds; Investment
Objective; Investment Policies and
Risk Considerations; Investment
Limitations
5. Management of the Fund Management; Transfer and Dividend
Disbursing Agent, Custodian and
Independent Accountants
5A. Management's Discussion of Fund <F1>
Performance
6. Capital Stock and Other Securities Capital Structure; Dividends and
Distributions; Taxes; Shareholder
Reports and Information
7. Purchase of Securities Being How to Purchase Shares; Pricing of
Offered Fund Shares; How to Exchange Shares;
Retirement Plans; Service and
Distribution Plan
8. Redemption or Repurchase How to Redeem Shares; Pricing of Fund
Shares; How to Exchange Shares
9. Legal Proceedings <F1>
PART B-INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
- ------------------------------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History <F2>
13. Investment Objectives and Policies Additional Investment Information;
Investment Restrictions
14. Management of the Fund Additional Trust Information
15. Control Persons and Principal Additional Trust Information
Holders of Securities
16. Investment Advisory and Other Additional Trust Information
Services
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Policies
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption and Pricing Included in the Prospectus under the
of Securities Being Offered heading "How to Purchase Shares,"
"Pricing of Fund Shares," "How to
Exchange Shares" and "How to Redeem
Shares" and in the Statement of
Additional Information under the
headings "Individual Retirement
Accounts"
20. Tax Status Included in the Prospectus under the
headings "Taxes" and "Dividends and
Distributions" and in the Statement
of Additional Information under the
heading "Taxes" and "Additional
Investment Information"
21. Underwriters <F1>
22. Calculation of Performance Data Included in the Prospectus under the
heading "Fund Performance" and in
the Statement of Additional
Information under the heading
"Performance Information"
23. Financial Statements Financial Statements
- ----------------------
<F1> Answer negative or inapplicable
<F2> Complete answer to Item is contained in the Prospectus
OCTOBER 1, 1996
PROSPECTUS
PURISIMA FUNDS
PURISIMA TOTAL RETURN FUND
- --------------------------
The Purisima Total Return Fund (the "Fund"), constituting the initial series
of The Purisima Funds (the "Trust"), is a no-load, open-end management
investment company, commonly known as a mutual fund. The investment objective of
the Fund is to produce a high level of total return. The Fund may emphasize
investments in common stocks and other equity-type securities, or securities
acquired primarily to produce income, or a combination of both, depending on the
assessment of market conditions by the Fund's investment adviser. When selecting
securities, the Fund's investment adviser will be limited (except as discussed
herein) only by its best judgment as to what will help achieve the Fund's
investment objective.
Fisher Investments, Inc. (the "Adviser") serves as the investment adviser
to the Fund. Kenneth L. Fisher, founder, Chairman and Chief Executive Officer of
Fisher Investments, Inc., manages the investment program of the Fund and is
primarily responsible for the day-to-day management of the Fund's investment
portfolio.
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. You are advised to read this Prospectus carefully
and keep it for future reference.
A Statement of Additional Information, dated October 1, 1996, which is
incorporated herein by reference, has been filed with the Securities and
Exchange Commission ("SEC"). The Statement of Additional Information, which
may be revised from time-to-time, contains further information about the Fund
and is available, without charge, by writing to the Fund at P.O. Box 731,
Milwaukee, Wisconsin 53201, or calling 1-800-871-2665.
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.
TABLE OF CONTENTS
- -----------------
Expense Summary 3
The Purisima Funds 4
Investment Objective 5
Investment Policies and Risk Considerations 5
Investment Limitations 13
Management 14
Pricing of Fund Shares 17
How to Purchase Shares 18
How to Exchange Shares 23
How to Redeem Shares 25
Dividends and Distributions 30
Shareholder Reports and Information 31
Retirement Plans 31
Service and Distribution Plan 32
Taxes 32
Capital Structure 33
Transfer and Dividend Disbursing Agent,
Custodian and Independent Accountants 34
Fund Performance 35
No person has been authorized to give any information or to make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. This Prospectus does not constitute an offering
by the Fund in any jurisdiction in which such offering may not lawfully be made.
EXPENSE SUMMARY
- ---------------
The following table is designed to assist you in understanding the expenses you
will bear directly or indirectly as a shareholder of the Purisima Total Return
Fund. Shareholder Transaction Expenses are charges that you pay when buying or
selling shares of the Fund. Annual Operating Expenses are paid out of the Fund's
assets and include fees for portfolio management, maintenance of shareholder
accounts, general Fund administration, shareholder servicing, custody,
accounting and other services. The Annual Operating Expenses are the expenses
expected to be incurred by the Fund during the current fiscal year. Actual total
operating expenses may be higher or lower than those indicated. An example based
on the summary is also shown.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load Imposed on Redemptions None
Redemption Fees<F3> None
Exchange Fees None
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00%
12b-1 Fees<F4> 0.25%
Other Expenses (net of reimbursement)<F5> 0.25%
Total Operating Expenses (net of reimbursement)<F5> 1.50%
<F3> A fee of $10.00 is charged for each wire redemption.
<F4> The maximum level of distribution expenses is 0.25% per annum of the
Fund's average net assets. See "Service and Distribution Plan" for
further details. The distribution expenses for long-term shareholders
may total more than the maximum sales charge that would have been
permissible if imposed entirely as an initial sales charge.
<F5> The Fund's investment adviser has voluntarily agreed to limit the Fund's
total operating expenses (excluding interest, taxes, brokerage and
extraordinary expenses) to an annual rate of 1.50% of the Fund's average
net assets for the Fund's first fiscal year. After such date, the
expense limitation may be terminated or revised at any time. The Fund
estimates that absent the limitation, "Other Expenses" would initially
be approximately 1.00%, and "Total Annual Operating Expenses" would
initially be approximately 2.25%.
EXAMPLE
Based on the foregoing table, you would pay the following
expenses on a $1,000 investment, assuming (i) a 5% annual
return and (ii) redemption at the end of each time period:
One Year $15
Three Years $48
THE EXAMPLES SHOWN ABOVE SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR
FUTURE EXPENSES, OR RATES OF RETURN. THE PURISIMA TOTAL RETURN FUND IS NEWLY-
FORMED AND ACTUAL OPERATING EXPENSES AND INVESTMENT RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN. Information about the actual performance of the Fund will be
contained in the Fund's future annual reports to shareholders, which may be
obtained without charge when they become available by calling 1-800-871-2665.
THE PURISIMA FUNDS
- ------------------
The Purisima Total Return Fund (the "Fund") is a no-load diversified mutual
fund. It constitutes the initial series of The Purisima Funds (the "Trust"), a
Delaware business trust organized on June 27, 1996, which is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act"). Prior to the sale of Fund shares hereunder, the Trust had no
operations other than matters relating to its organization and the creation of
the Fund.
Fisher Investments, Inc. (the "Adviser"), serves as the Fund's investment
adviser. Kenneth L. Fisher, founder, Chairman and Chief Executive Officer of the
Adviser, manages the investment program of the Fund and is primarily responsible
for the day-to-day management of the Fund's portfolio. See "Management."
INVESTMENT OBJECTIVE
- --------------------
The investment objective of the Fund is to produce a high level of total return.
The Fund seeks to achieve its objective by following the policies discussed
below. Because of the risks inherent in all investments, there can be no
assurance that the Fund will meet its objective. The Fund is not intended by
itself to constitute a balanced investment program.
INVESTMENT POLICIES
AND RISK CONSIDERATIONS
- -----------------------
GENERAL. The Fund seeks to achieve its objective of producing a high level of
total return by investing in common stocks and other equity-type securities,
corporate and government debt securities and short-term money market
instruments. Through active portfolio management, the Adviser will consider the
relative returns from asset allocation, equity style, as well as individual
security selection, in seeking to achieve the Fund's objective. Unless
specifically designated as a "fundamental" policy (which may be changed only
with the approval by a majority of the Fund's outstanding shares, as defined in
the 1940 Act), all investment policies described below may be changed by the
Fund's Board of Trustees without shareholder approval.
The relative percentages of assets invested in equity, fixed income and
money market securities are not fixed and will vary depending on the Adviser's
assessment of economic and market conditions. At times, when the investment
climate is viewed as favorable, common stocks and other equity-type securities
may be emphasized (up to 100% of the Fund's total assets). Conversely, when the
Adviser believes that, in light of economic and market conditions, a more
defensive position would be appropriate and that the Fund's objective may be
more readily attained by investing in fixed income securities and money market
investments, these investments will be emphasized (up to 100% of the Fund's
total assets).
In the same manner, and except as discussed below, the Fund may invest in
portfolio securities without regard to objective investment criteria such as
company size (market capitalization), earnings history, valuation or other
factors. At times, the Fund may emphasize securities of small, mid- or large
capitalization companies. In addition, at times the Fund may emphasize
securities of companies which it believes are undervalued relative to earnings,
book value or other factors or companies which it expects to have above-average
earnings growth prospects. When selecting securities, the Adviser will, except
as otherwise described below, be limited only by its best judgment as to what
will help achieve the Fund's investment objective.
EQUITY SECURITIES. The Fund may invest in equity securities, including common
stock, preferred stock, convertible securities, warrants, rights and depository
receipts. To the extent that the Fund's portfolio is primarily invested in
common stocks and other equity-type securities, the Fund's net asset value may
be subject to greater fluctuation than a portfolio primarily invested in fixed
income securities.
The Fund will limit its investments in warrants and rights to no more than
5% of its net assets, valued at the lower of cost or market. Warrants and rights
entitle the holder to buy equity securities during a specific period of time.
The Fund will make such investments only if the underlying equity securities are
deemed appropriate by the Adviser for inclusion in the Fund's portfolio.
Included in the 5% amount, but not to exceed 2% of net assets, are warrants and
rights whose underlying securities are not traded on principal domestic or
foreign exchanges. Warrants and rights acquired by the Fund in units or attached
to securities are not subject to these restrictions.
FIXED INCOME SECURITIES. The Fund may invest in fixed income securities issued
by domestic or foreign corporations or other entities, or by U.S. or foreign
governments or their agencies or instrumentalities. The Fund is not limited as
to the maturity of its fixed income investments. Corporate and foreign
governmental debt securities are subject to the risk of the issuer's inability
to meet principal and interest payments on the obligations (credit risk), and
may also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and general
market liquidity (market risk). The market value of all debt obligations is
affected by changes in prevailing interest rates. The market value of such
instruments generally reacts inversely to interest rate changes. If prevailing
interest rates decline, the market value of debt obligations generally
increases. If prevailing interest rates increase, the market value of debt
obligations generally decreases. In general, the longer the maturity of a debt
obligation, the greater its sensitivity to changes in interest rates.
In order to reduce the risk of non-payment of principal or interest on these
securities, fixed income securities purchased by the Fund will be limited to
investment grade fixed income securities. Investment grade securities are those
securities which, at the time of purchase, are rated within the four highest
rating categories by Moody's Investors Service, Inc. ("Moody's") (Baa or
higher), Standard & Poor's Corporation ("S&P") (BBB or higher), or other
nationally recognized securities rating organizations, or securities which are
unrated but deemed by the Adviser to be comparable in quality to instruments
that are so rated. Obligations rated in the lowest of the top four ratings,
though considered investment grade, are considered to have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher rated securities. Subsequent to its
purchase by the Fund, a rated security may cease to be rated or its rating may
be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such an event in determining whether the Fund should
continue to hold the security, but such an event will not require the Fund to
dispose of the security. See the Statement of Additional Information for a
description of applicable debt ratings.
Fixed income securities in which the Fund may invest include obligations
issued by the U.S. government or by any agency, instrumentality or sponsored
enterprise thereof supported by the full faith and credit of the U.S.
government, the authority of the issuer to borrow from the U.S. Treasury, or the
discretionary authority of the U.S. government to purchase the obligations of
the agency, instrumentality or enterprise; obligations fully guaranteed as to
principal and interest by an agency, instrumentality or sponsored enterprise of
the U.S. government; and obligations of U.S. government agencies,
instrumentalities or sponsored enterprises which are not guaranteed. The Fund
may also invest in zero coupon U.S. Treasury securities and in zero coupon
securities issued by financial institutions, which represent a proportionate
interest in underlying U.S. Treasury securities. The Fund will not invest in
mortgage- and asset-backed securities if after the purchase more than 5% of the
Fund's net assets would be invested in these securities.
MONEY MARKET INSTRUMENTS. During times when the Adviser believes that adverse
economic or market conditions justify such actions, the Fund may invest
temporarily up to 100% of its total assets in short-term, high-quality money
market instruments. The Fund may also invest in such instruments pending
investment in other types of securities, to meet anticipated redemption
requests, and/or to retain the flexibility to respond promptly to changes in
market and economic conditions. It is impossible to predict when or for how long
the Adviser may employ these strategies.
Money market instruments are short-term high-quality debt securities (rated
in the top two categories by S&P, Moody's or other nationally recognized
securities rating organizations) denominated in U.S. dollars or other freely
convertible currency, including short-term obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities, U.S. finance company
obligations, corporate commercial paper, obligations of banks and repurchase
agreements. The Fund's repurchase agreements will be fully collateralized.
However, if the seller of the securities fails to pay the agreed-upon repurchase
price on the delivery date, the Fund's risks may include the costs of disposing
of the collateral and losses that might result from any delays in foreclosing on
the collateral. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements maturing in seven days or less.
The Fund's investment in money market instruments may also include
securities issued by other investment companies that invest in high quality,
short-term debt securities (i.e., money market instruments). In addition to the
advisory fees and other expenses the Fund bears directly in connection with its
own operations, as a shareholder of another investment company, the Fund would
bear its pro rata portion of the other investment company's advisory fees and
other expenses, and such fees and other expenses will be borne indirectly by the
Fund's shareholders.
SMALLER CAPITALIZATION COMPANIES. The Fund may invest a substantial portion of
its assets in companies with modest capitalization, as well as start-up
companies. While the Adviser believes that small- and medium-sized companies as
well as start-up companies can provide greater growth potential than larger,
more mature companies, investing in the securities of such companies also
involves greater risk, potential price volatility and cost. These companies
often involve higher risks because they lack the management experience,
financial resources, product diversification, markets, distribution channels and
competitive strengths of larger companies. In addition, in many instances, the
frequency and volume of their trading is substantially less than is typical of
larger companies. Therefore, the securities of smaller companies as well as
start-up companies may be subject to wider price fluctuations. The spreads
between the bid and asked prices of the securities of these companies in the
U.S. over-the-counter market typically are larger than the spreads for more
actively traded securities. As a result, a Fund could incur a loss if it
determined to sell such a security shortly after its acquisition. When making
large sales, a Fund may have to sell portfolio holdings at discounts from quoted
prices or may have to make a series of small sales over an extended period of
time due to the trading volume of smaller company securities.
Investors should be aware that, based on the foregoing factors, to the
extent the Fund invests a significant portion of its assets in the securities of
smaller companies, an investment in the Fund may be subject to greater price
fluctuations than if it invested primarily in larger, more established
companies. The Fund will limit its investments in securities of any issuer
which, together with any predecessor entity, has a record of less than three
years of continuous operation, to no more than 10% of the Fund's total assets at
the time of purchase.
FOREIGN SECURITIES. The Fund may invest without limitation in securities of
foreign issuers through sponsored and unsponsored Depositary Receipts ("DRs"),
e.g., American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs"), Continental Depositary
Receipts ("CDRs"), or other forms of DRs, and may invest up to 5% of its net
assets at the time of purchase directly in the securities of foreign issuers.
DRs are receipts typically issued in connection with a United States or foreign
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. Unsponsored DRs differ from sponsored DRs in that the
establishment of unsponsored DRs is not approved by the issuer of the underlying
securities. As a result, available information concerning the issuer may not be
as current or reliable as the information for sponsored DRs, and the price of
unsponsored DRs may be more volatile.
Investments in foreign securities involve special risks, costs and
opportunities which are in addition to those inherent in domestic investments.
Political, economic or social instability of the issuer or the country of issue,
the possibility of expropriation or confiscatory taxation, limitations on the
removal of assets or diplomatic developments, and the possibility of adverse
changes in investment or exchange control regulations are among the inherent
risks. Securities of some foreign companies are less liquid, more volatile and
more difficult to value than securities of comparable U.S. companies. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. Currency fluctuations will affect the net asset value of the
Fund irrespective of the performance of the underlying investments in foreign
issuers. Dividends and interest payable on a Fund's foreign portfolio
securities may be subject to foreign withholding taxes. To the extent such taxes
are not offset by credits or deductions allowed to investors under U.S. federal
income tax law, such taxes may reduce the net return to shareholders. See
"Taxes" in the Statement of Additional Information. Because of these and other
factors, the value of securities of foreign companies acquired by the Fund may
be subject to greater fluctuation than the value of securities of domestic
companies.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities are securities that are not readily marketable,
including restricted securities and repurchase obligations maturing in more than
seven days. Certain restricted securities that may be resold to institutional
investors under Rule 144A under the Securities Act of 1933 and Section 4(2)
commercial paper may be determined to be liquid under guidelines adopted by the
Trust's Board of Trustees.
WHEN-ISSUED SECURITIES. The Fund may invest without limitation in securities
purchased on a when-issued or delayed delivery basis. Although the payment and
interest terms of these securities are established at the time the purchaser
enters into the commitment, these securities may be delivered and paid for at a
future date. Purchasing when-issued securities allows the Fund to lock in a
fixed price or yield on a security it intends to purchase. However, when the
Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation.
The greater the Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of the
Fund. Purchasing when-issued securities may involve the additional risk that the
yield available in the market when the delivery occurs may be higher, or the
market price lower, than that obtained at the time of commitment. Although the
Fund may be able to sell these securities prior to the delivery date, it will
purchase when-issued securities for the purpose of actually acquiring the
securities, unless, after entering into the commitment, a sale appears desirable
for investment reasons. When required by Securities and Exchange Commission
("SEC") guidelines, the Fund will set aside permissible liquid assets in a
segregated account to secure its outstanding commitments for when-issued
securities.
HEDGING STRATEGIES. The Fund may use various options transactions for the
purpose of hedging or earning additional income, which may be deemed
speculative. There can be no assurance that such efforts will succeed. The Fund
may write (i.e. sell) call and put options, and buy put or call options. These
options may relate to particular securities or stock or bond indexes, may or may
not be listed on a securities exchange, and may or may not be issued by the
Options Clearing Corporation. These options are considered derivative
instruments because they derive their value from the performance of underlying
assets, interest rates or indices. The Fund will not purchase put and call
options where the aggregate premiums on its outstanding options exceed 5% of its
net assets at the time of purchase, and will not write options on more than 25%
of the value of its net assets (measured at the time an option is written).
Options trading is a highly specialized activity that entails greater than
ordinary investment risks. In addition, unlisted options are not subject to the
protections afforded purchasers of listed options issued by the Options Clearing
Corporation, which performs the obligations of its members if they default. It
is contemplated the Fund's use of options will primarily be options on stock
indexes. These options are based on indexes of stock prices that change in value
according to the market value of the stocks they include. Some stock index
options are based on a broad market index, such as the New York Stock Exchange
Composite Index or the Standard & Poor's 500 Composite Index. Other index
options are based on a market segment or on stocks in a single industry. Stock
index options are traded primarily on securities exchanges. The value of an
index option depends primarily on movements in the value of the index rather
than in the price of a single security. The primary risks associated with the
use of options are: (a) the imperfect correlation between the change in market
value of the instruments held by the Fund and the price of the option; (b) the
possible inability to control losses by closing its position where a liquid
secondary market does not exist; (c) losses caused by unanticipated market
movements; and (d) the Adviser's ability to predict correctly the direction of
securities prices or the stock market generally, and economic factors. For
further discussion of risks involved with the use of options, see "Additional
Investment Information - Hedging Strategies" in the Statement of Additional
Information.
PORTFOLIO TURNOVER. In order to achieve the Fund's investment objective, the
Adviser will generally purchase and sell securities without regard to the length
of time the security has been held. The Adviser intends to purchase a given
security whenever it believes it will contribute to the stated objective of the
Fund, even if the same security has only recently been sold. In selling a given
security, the Adviser keeps in mind that profits from sales of securities held
less than three months must be limited in order to meet the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended. Subject to the
foregoing, the Fund may sell a given security, regardless of how long it has
been held in the portfolio, and whether the sale is at a gain or loss, if the
Adviser believes that it is appropriate to do so. High portfolio turnover in any
year will result in the payment by the Fund of above-average transaction costs
and could result in the payment by shareholders of above-average amounts of
taxes on realized investment gains. The annual portfolio turnover for the Fund
is currently expected to be less than 150%; however, the Fund does not consider
the portfolio turnover rate as a limiting factor.
INVESTMENT LIMITATIONS
- ----------------------
The Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval by a majority of its outstanding shares. The
following description summarizes several of the Fund's fundamental restrictions
which have been adopted to maintain portfolio diversification and reduce risk.
The Fund may not:
1. purchase the securities of any issuer if the purchase would cause more than
5% of the value of the Fund's total assets to be invested in securities of
any one issuer (except securities of the U.S. government or any agency or
instrumentality thereof), or purchase more than 10% of the outstanding
voting securities of any one issuer, except that up to 25% of the Fund's
total assets may be invested without regard to these limitations;
2. invest 25% or more of its total assets at the time of purchase in
securities of issuers whose principal business activities are in the same
industry; and
3. borrow money except for temporary purposes in amounts up to 33 1/3% of the
value of its total assets at the time of borrowing.
A list of the Fund's restrictions, both fundamental and nonfundamental, is
contained in the Statement of Additional Information. In order to provide a
degree of flexibility, the Fund's investment objective, as well as other
policies which are not deemed fundamental, may be modified by the trustees
without shareholder approval. Any change in the Fund's investment objective may
result in the Fund having investment objectives different from the objective
which the shareholder considered appropriate at the time of investment in the
Fund. However, the Fund will not change its investment objective without written
notice to shareholders sent at least 30 days in advance of any such change.
MANAGEMENT
- ----------
As a Delaware business trust, the business affairs of the Trust are managed by
its Board of Trustees. The trustees establish the Fund's policies and supervise
and review its management. The Trust, on behalf of the Fund, has entered into an
investment management agreement with Fisher Investments, Inc. (the "Investment
Management Agreement"), pursuant to which the Adviser furnishes continuous
investment advisory services to 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 Management Agreement.
INVESTMENT ADVISER. Fisher Investments, Inc., 13100 Skyline Boulevard, Woodside,
California, 94062-4547, is the Fund's investment adviser (the "Adviser"). The
Adviser supervises and manages the investment portfolio of the Fund, and subject
to such policies as the trustees may determine, directs the purchase or sale of
investment securities in the day-to-day management of the Fund's investment
portfolio. As of September 1996 the Adviser managed in excess of $1.1 billion
for large corporations, pension plans, endowments, foundations, governmental
agencies and individuals. Kenneth L. Fisher, the founder, Chairman and Chief
Executive Officer of the Adviser, controls the Adviser.
Mr. Fisher serves as the Fund's portfolio manager and as such is primarily
responsible for the day-to-day management of the Fund's portfolio. He has served
as portfolio manager of the Fund since its commencement of operations in October
1996. Mr. Fisher has over 20 years of investment management experience. Mr.
Fisher began Fisher Investments as a sole proprietorship in 1978 and
incorporated the company under the name Fisher Investments, Inc. in 1986.
Under the Investment Management Agreement, the Adviser, at its own expense
and without reimbursement from the Fund, furnishes office space and all
necessary office facilities, equipment and executive personnel for making the
investment decisions necessary for managing the Fund and maintaining its
organization, and pays the salaries and fees of all officers and trustees of the
Trust (except the fees paid to those trustees who are not interested persons of
the Trust or the Adviser). For the foregoing, the Adviser receives a monthly fee
of 1/12 of 1.00% of the average daily net assets of the Fund. The Adviser may
voluntarily waive all or a portion of its advisory fee and/or absorb operating
expenses that the Fund is obligated to pay from time-to-time. See "Expense
Summary." The Investment Management Agreement permits the Adviser to seek
reimbursement of any reductions made to its management fee and any payments by
the Adviser of operating expenses that the Fund is obligated to pay within the
three-year period following such reduction or payment, subject to the Fund's
ability to effect such reimbursement and remain in compliance with applicable
expense limitations. See "Additional Trust Information Investment Advice" in
the Statement of Additional Information for a further discussion. The rate of
the advisory fee is higher than that paid by most mutual funds. However, the
trustees believe the advisory fee is appropriate for the Fund in light of the
Fund's investment objective and policies. The factors the Adviser considers in
determining which brokers or dealers to use for the Fund's portfolio
transactions are described in the Statement of Additional Information. Provided
the Fund receives prompt execution at competitive prices, the Adviser may
consider the sale of the Fund's shares as a factor in selecting broker-dealers.
ADMINISTRATION. Pursuant to an Administration and Fund Accounting Agreement (the
"Administration Agreement"), Sunstone Financial Group, Inc. (the
"Administrator" or "Sunstone"), 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202, acts as administrator for the Fund. The
Administrator, at its own expense and without reimbursement from the Fund,
furnishes office space and all necessary office facilities, equipment, supplies
and clerical and executive personnel for performing the services required to be
performed by it under the Administration Agreement. For its administrative
services (which include compliance, regulatory, fund accounting and other
services), the Administrator receives from the Fund a fee, computed daily and
payable monthly, based on the Fund's aggregate average net assets at the annual
rate of 0.22 of 1.0% on the first $50,000,000 of average net assets, 0.15 of
1.0% on the next $50,000,000 of average net assets, and 0.07 of 1.0% on average
net assets in excess of $100,000,000, subject to an annual minimum of $75,000,
plus reimbursement of out-of-pocket expenses. In addition, the Administrator
received from the Fund $ ________ for organizational services provided by the
Administrator.
DISTRIBUTION. Sunstone acts as distributor for the Fund pursuant to a
Distribution Agreement between Sunstone and the Trust on behalf of the Fund (the
"Distribution Agreement"). Shares also may be sold by authorized dealers who
have entered into dealer agreements with Sunstone or the Trust. Pursuant to the
Distribution Agreement, the Fund will (1) pay Sunstone a fee, payable monthly,
based on the Fund's aggregate average net assets at the annual rate of 0.20 of
1.0% on the Fund's first $50,000,000 of average net assets, 0.10 of 1.0% on the
next $50,000,000 of average net assets, and 0.05 of 1% on average net assets in
excess of $100,000,000, subject to a minimum aggregate annual fee of $50,000,
and (2) reimburse Sunstone's out-of-pocket expenses; provided, however, that if
during any annual period, such compensation and reimbursement payments and other
payments under the Service and Distribution Plan exceed 0.25% of the Fund's
average daily net assets, Sunstone will rebate its fees in the amount of such
excess to the Fund. See "Service and Distribution Plan."
EXPENSES. In addition to the fees payable under the Investment Management
Agreement and the Administration Agreement, the Fund pays all of its own other
expenses, including without limitation: the cost of preparing and printing its
registration statement required under the Securities Act of 1933 and the 1940
Act and any amendments thereto; the expense of registering shares with the SEC
and in the various states; the printing and distribution costs of prospectuses
mailed to existing shareholders, reports to shareholders, reports to government
authorities and proxy statements; fees paid to trustees who are not interested
persons of the Trust or Adviser; interest charges; taxes; legal expenses;
association membership dues; auditing services; insurance premiums; brokerage
commissions and expenses in connection with portfolio transactions; fees and
expenses of the custodian of the Fund's assets; printing and mailing expenses
and charges and expenses of dividend disbursing agents, administration and
accounting services agents, pricing services, custodians, registrars and stock
transfer agents; and payments pursuant to the Fund's Service and Distribution
Plan. See "Service and Distribution Plan."
PRICING OF FUND SHARES
- ----------------------
The price you pay when buying the Fund's shares, and the price you receive when
selling (redeeming) the Fund's shares, is the net asset value of the shares next
determined after receipt and acceptance of a purchase or redemption request in
proper form. No front end sales charge or commission of any kind is added by the
Fund upon a purchase and no charge is deducted upon a redemption. The Fund
currently charges a $10 fee for each redemption made by wire. See "How to
Redeem Shares."
The per share net asset value of the Fund is determined by dividing the
total value of its net assets (meaning its assets less its liabilities) by the
total number of its shares outstanding at that time. The net asset value is
determined as of the close of regular trading (currently 4:00 p.m. Eastern Time)
on the New York Stock Exchange (the "Exchange") on each day the Exchange is
open for trading. This determination is applicable to all transactions in shares
of the Fund prior to that time and after the previous time as of which the
Fund's net asset value was determined. Accordingly, investments accepted or
redemption requests received in proper form prior to the close of regular
trading on a day the Exchange is open for trading will be valued as of the close
of trading that day, and investments accepted or redemption requests received in
proper form after that time will be valued as of the close of the next trading
day.
Investments are considered received only when an investor's check, wired
funds or electronically transferred funds are received by the Fund or its agent
or subagent. Investments by telephone pursuant to an investor's prior
authorization to the Fund to draw on his or her bank account are considered
received when the proceeds from the bank account are received by the Fund, which
generally takes two to three banking days.
Securities which are traded on a recognized stock exchange are valued at the
last sale price on the securities exchange on which such securities are
primarily traded. Securities traded on only over-the-counter markets are valued
on the basis of closing over-the-counter trade prices. Securities for which
there were no transactions are valued at the closing bid prices. Debt securities
(other than short-term instruments) are valued at prices furnished by a pricing
service, subject to review and possible revision by the Adviser. Any
modification of the price of a debt security furnished by a pricing service is
made pursuant to procedures adopted by the trustees. Debt instruments maturing
within 60 days are valued by the amortized cost method. Any securities for which
market quotations are not readily available are valued at their fair value as
determined in good faith by the Adviser pursuant to guidelines established by
the trustees.
HOW TO PURCHASE SHARES
- ----------------------
The Fund is a no-load fund, so you may purchase, redeem or exchange shares
directly at net asset value without paying a sales charge. Because the Fund's
net asset value changes daily, your purchase price will be the next net asset
value determined after the Fund, or its agent or subagent, receives and accepts
your purchase order. See "Pricing of Fund Shares."
INITIAL MINIMUM ADDITIONAL MINIMUM
TYPE OF ACCOUNT INVESTMENT INVESTMENT
- -----------------------------------------------------------------------------
Regular $25,000 $5,000
Automatic Investment Plan $25,000 $ 100
Gift to Minors $25,000 $5,000
Individual Retirement Account ("IRA") $25,000 $ 100
The Fund reserves the right to reject any order for the purchase of its
shares or to limit or suspend, without prior notice, the offering of its shares.
The required minimum investments may be waived in the case of certain qualified
retirement plans. The Fund will not accept your account if you are investing for
another person as attorney-in-fact. The Fund also will not accept accounts with
a "Power of Attorney" in the registration section of the Purchase Application.
HOW TO OPEN YOUR ACCOUNT BY MAIL. Please complete the Purchase Application which
accompanies this Prospectus. You may duplicate any application or you can obtain
additional copies of the Purchase Application and a copy of the IRA Purchase
Application from the Fund by calling 1-800-871-2665. (Please complete an IRA
Application to establish an IRA.)
Your completed Purchase Application should be mailed directly to:
The Purisima Funds
P.O. Box 731
Milwaukee, Wisconsin 53201
To purchase shares by overnight or express mail, please use the following street
address:
The Purisima Funds
207 East Buffalo Street, Suite 315
Milwaukee, Wisconsin 53202-5712
All applications must be accompanied by payment in the form of a check made
payable to "Purisima Funds." All purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks. No cash, credit cards or third party checks
will be accepted. When a purchase is made by check and a redemption or exchange
is made shortly thereafter, the Fund will delay the mailing of a redemption
check until the purchase check has cleared your bank, which may take up to seven
business days from the purchase date. If you contemplate needing access to your
investment shortly after purchase, you should purchase the shares by wire as
discussed below.
HOW TO OPEN YOUR ACCOUNT BY WIRE. To avoid redemption delays, you may make
purchases by direct wire transfers. To ensure proper credit to your account,
please call the Fund at 1-800-871-2665 for instructions prior to wiring funds.
Funds should be wired through the Federal Reserve System as follows:
UMB Bank, n.a.
A.B.A. Number 101000695
For credit to The Purisima Funds
Account Number 9870783304
For further credit to:
(investor account number)
(name or account registration)
(Social Security or Tax Identification Number)
The Purisima Total Return Fund
You must promptly complete a Purchase Application and mail it to the Fund at
the following address: The Purisima Funds, P.O. Box 731, Milwaukee, Wisconsin
53201. Payment of redemption proceeds may be delayed and taxes may be withheld
until the Fund receives a properly completed and executed Purchase Application.
If you wish to send it via overnight delivery, you may send it to: The Purisima
Funds, 207 East Buffalo Street, Suite 315, Milwaukee, Wisconsin 53202-5712. The
Fund reserves the right to refuse a telephone transaction if it believes it
advisable to do so.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE FUND AT 1-800-871-2665.
HOW TO ADD TO YOUR ACCOUNT BY MAIL. You may make additional investments by mail
or by wire in the minimums listed above. When adding to an account by mail, you
should send the Fund your check, together with the additional investment form
from a recent statement. If this form is unavailable, you should send a signed
note giving the full name of the account and the account number. See
"Additional Purchase Information" for more information regarding purchases
made by check or electronic funds transfer.
HOW TO ADD TO YOUR ACCOUNT BY ELECTRONIC FUNDS TRANSFER. You may also make
additional investments by telephone if you have previously selected this
service. By selecting this service, you authorize the Fund to draw on your
preauthorized bank account as shown on the records of the Fund and receive the
proceeds by electronic funds transfer. Electronic funds transfers may be made
commencing ten business days after receipt by the Fund of your request to adopt
this service. This time period allows the Fund to verify your bank information.
Investments made by telephone in any one account must be in an amount of at
least $5,000. Investments made by electronic funds transfer will be effective at
the net asset value next computed after receipt by the Fund of the proceeds from
your bank account. See "Additional Purchase Information" for more information
regarding purchases made by check or electronic funds transfer. This service may
be selected by completing the appropriate section on the Purchase Application.
Changes to bank information must be made in writing and signed by all registered
holders of the account with all signatures guaranteed by a commercial bank or
trust company in the United States, a member firm of the National Association of
Securities Dealers, Inc. ("NASD") or other eligible guarantor institution. A
NOTARY PUBLIC IS NOT AN ACCEPTABLE GUARANTOR. See "Pricing of Fund Shares."
HOW TO ADD TO YOUR ACCOUNT BY WIRE. For additional investments made by wire
transfer, you should use the wiring instructions listed above. Be sure to
include your account number. WIRED FUNDS ARE CONSIDERED RECEIVED IN GOOD ORDER
ON THE DAY THEY ARE DEPOSITED IN THE FUND'S ACCOUNT IF THEY REACH THE FUND'S
BANK ACCOUNT BY THE FUND'S CUT-OFF TIME FOR PURCHASES AND ALL REQUIRED
INFORMATION IS PROVIDED IN THE WIRE INSTRUCTIONS. THE WIRE INSTRUCTIONS WILL
DETERMINE THE TERMS OF THE PURCHASE TRANSACTION.
AUTOMATIC INVESTMENT PLAN. You may make purchases of shares of the Fund
automatically on a regular, monthly basis ($100 minimum per transaction). You
must meet the Automatic Investment Plan's (the "Plan") minimum initial
investment of $25,000 before the Plan may be established. Under the Plan, your
designated bank or other financial institution debits a preauthorized amount on
your account each month and applies the amount to the purchase of Fund shares.
The Fund requires ten business days after the receipt of your request to
initiate the Plan to verify your account information. Generally, the Plan will
begin on the next transaction date scheduled by the Fund for the Plan following
this ten business day period. The Plan can be implemented with any financial
institution that is a member of the Automated Clearing House. No service fee is
currently charged by the Fund for participation in the Plan. You will receive a
statement on a QUARTERLY basis showing the purchases made under the Plan. A $20
fee will be imposed by the Fund if sufficient funds are not available in your
account or your account has been closed at the time of the automatic transaction
and YOUR PURCHASE WILL BE CANCELED. YOU WILL ALSO BE RESPONSIBLE FOR ANY LOSSES
SUFFERED BY THE FUND AS A RESULT.
When a purchase is made pursuant to the Plan and a redemption or exchange is
requested shortly thereafter, the Fund will delay payment of the redemption
proceeds or the completion of an exchange until the proceeds have cleared your
bank, which may take seven business days from the purchase date. This delay
allows the Fund to verify that proceeds used to purchase fund shares will not be
returned due to insufficient funds and is intended to protect the remaining
investors from loss. You may adopt the Plan at the time an account is opened by
completing the appropriate section of the Purchase Application. To establish the
Plan after an account is opened, an application may be obtained from the Fund by
calling 1-800-871-2665. In the event you discontinue participation in the Plan,
the Fund reserves the right to redeem your Fund account involuntarily, upon 60
days written notice, if the account's net asset value is $10,000 or less.
Redeeming all funds from your account will discontinue your Plan privileges
unless otherwise specified.
PURCHASING SHARES THROUGH OTHER INSTITUTIONS. If you purchase shares through a
program of services offered or administered by a broker-dealer, financial
institution, or other service provider, you should read the program materials,
including information relating to fees, in addition to the Fund's Prospectus.
Certain services of the Fund may not be available or may be modified in
connection with the program of services provided. The Fund may only accept
requests to purchase additional shares into a broker-dealer street name account
from the broker-dealer. Banks and other financial service providers may be
subject to various state laws regarding the services described above, and may be
required to register as dealers pursuant to state law.
The Fund may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer. Certain
broker-dealers, financial institutions, or other service providers that have
entered into an agreement with the Trust may enter purchase orders on behalf
of their customers by phone, with payment to follow within several days as
specified in the agreement. The Fund may effect such purchase orders at the
net asset value next determined after receipt of the telephone purchase order.
It is the responsibility of the broker-dealer, financial institution, or
other service provider to place the order with the Fund on a timely basis.
If payment is not received within the time specified in the agreement, the
broker-dealer, financial institution, or other service provider could be
held liable for any resulting fees or losses.
ADDITIONAL PURCHASE INFORMATION. The Fund will charge a $20 service fee against
your account for any check, wire or electronic funds transfer that is returned
unpaid and your purchase will be canceled. You will also be responsible for any
losses suffered by the Fund as a result. In order to relieve you of
responsibility for the safekeeping and delivery of stock certificates, the Fund
does not issue certificates.
When a purchase is made by check or electronic funds transfer and a
redemption or exchange is requested shortly thereafter, the Fund will delay
payment of the redemption proceeds or the completion of an exchange until the
purchase check has cleared your bank, which may take SEVEN business days from
the purchase date. This delay allows the Fund to verify that proceeds used to
purchase Fund shares will not be returned due to insufficient funds and is
intended to protect the remaining investors from loss.
HOW TO EXCHANGE SHARES
- ----------------------
Shareholders may exchange all or a portion of their shares in the Fund for
shares in the Northern Money Market Fund (the "Money Market Fund"). The Money
Market Fund is not affiliated with the Trust. You must obtain a copy of the
Money Market Fund prospectus from the Fund by calling 1-800-871-2665, and you
are advised to read it carefully, before authorizing any investment in shares of
the Money Market Fund. See "Additional Exchange Information" regarding
telephone exchanges.
The value to be exchanged and the price of the shares being purchased will
be the net asset value next determined by the Fund after receipt and acceptance
of proper instructions for the exchange by the Fund or its agent or subagent. If
you desire to use the exchange privilege, you should contact the Fund at 1-800-
871-2665 for further information about the procedures and effective times for
exchanges. Generally, exchange requests received in proper order and accepted by
the Fund by 3:00 p.m. (Central Time) on a day during which the Fund's net asset
value is determined will be effective that day for both the Fund being purchased
and the Fund being redeemed. Please note that when exchanging from the Fund to
the Money Market Fund, you will begin accruing income from the Money Market Fund
on the day following the exchange. When exchanging less than all the balance
from the Money Market Fund to the Fund your exchange proceeds will exclude
accrued and unpaid income from the Money Market Fund through the date of
exchange. When exchanging your entire balance from the Money Market Fund,
accrued income will automatically be exchanged into the Fund when the income is
collected from the Money Market Fund, typically after the end of each month. An
exchange to and from the Money Market Fund is treated the same as an ordinary
sale and purchase for federal income tax purposes and you generally will realize
a capital gain or loss when exchanging shares to the Money Market Fund.
See "Additional Exchange Information" regarding purchases made by check or
electronic funds transfer. If you intend to exchange shares soon after their
purchase, you should purchase the shares by wire or contact the Fund at 1-800-
871-2665 for further information.
Because of the risks associated with common stock investments, the Fund is
intended to be a long-term investment vehicle and not designed to provide
investors with a means of speculating on short-term stock market movements. In
addition, because excessive trading can hurt the Fund's performance and Fund
shareholders, the Fund reserves the right to temporarily or permanently
terminate, with or without advance notice, the exchange privilege of any
investor who makes excessive use of the exchange privilege (e.g. more than four
exchanges per calendar year). Your exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges with a "market
timer" strategy may be disruptive to the Fund. Contact the Fund for additional
information concerning the exchange privilege.
AUTOMATIC EXCHANGE PLAN. You may make automatic monthly exchanges from the Money
Market Fund to a Fund account ($100 minimum per transaction). An exchange from
one fund to another is treated the same as an ordinary sale and purchase for
federal income tax purposes and generally, you will realize a capital gain or
loss. You must meet the Fund's minimum initial investment requirements before
this Plan is established. You may adopt the Plan at the time an account is
opened by completing the appropriate section of the Purchase Application. You
may obtain an application to establish the Automatic Exchange Plan after an
account is open by calling the Fund at 1-800-871-2665.
ADDITIONAL EXCHANGE INFORMATION. When a purchase is made by check or electronic
funds transfer and a redemption or exchange is requested shortly thereafter, the
Fund will delay payment of the redemption proceeds or the completion of an
exchange until the purchase check has cleared your bank, which may take seven
business days from the purchase date. This delay allows the Fund to verify that
proceeds used to purchase Fund shares will not be returned due to insufficient
funds and is intended to protect the remaining investors from loss.
Signature guarantees must be signed by an authorized signatory of the bank,
trust company, or member firm and "Signature Guaranteed" must appear with the
signature.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Fund at any time. The price at which the shares
will be redeemed is the net asset value per share next determined after proper
redemption instructions are received by the Fund or its agent or subagent. See
"Pricing of Fund Shares." There are no charges for the redemption of shares
except that a fee of $10 is charged by the Fund for each wire redemption.
Depending upon the redemption price you receive, you may realize a capital gain
or loss for federal income tax purposes.
HOW TO REDEEM BY MAIL. To redeem shares by mail, simply send an unconditional
written request to the Fund specifying the number of shares or dollar amount to
be redeemed, the name of the Fund, the name(s) on the account registration and
the account number. A request for redemption must be signed exactly as the
shares are registered. If the amount requested is greater than $50,000, or
the proceeds are to be sent to a person other than the recordholder or to a
location other than the address of record, each signature must be guaranteed by
a commercial bank or trust company in the United States, a member firm of the
NASD or other eligible guarantor institution. A NOTARY PUBLIC IS NOT AN
ACCEPTABLE GUARANTOR. Guarantees must be signed by an authorized signatory
of the bank, trust company, or member firm and "Signature Guaranteed" must
appear with the signature. See "Additional Redemption Information" for
instructions on redeeming shares in corporate accounts. Additional documentation
is required for the redemption of shares held by persons acting pursuant to a
Power of Attorney. In case of any questions, contact the Fund in advance.
The Fund will mail payment for redemptions within seven business days after
it receives proper instructions for redemption. However, the Fund will delay
payment for seven business days on redemptions of recent purchases made by check
or electronic funds transfer. This allows the Fund to verify that the check will
not be returned due to insufficient funds and is intended to protect the
remaining investors from loss.
HOW TO REDEEM BY TELEPHONE. See "Additional Information" regarding telephone
redemptions. Shares may be redeemed, in an amount up to $50,000 by calling the
Fund at 1-800-871-2665. Proceeds redeemed by telephone will be mailed to your
address, or wired or transmitted by electronic funds transfer to your
preauthorized bank account as shown on the records of the Fund. A redemption
request in excess of $50,000 must be made in writing and signed by each
registered holder of the account with signatures guaranteed by a commercial bank
or trust company in the United States, a member of the NASD or other eligible
guarantor institution. A NOTARY PUBLIC IS NOT AN ACCEPTABLE GUARANTOR. Any
written requests received within 30 days after an address change made by
telephone must be accompanied by a signature guarantee and no telephone
redemptions will be allowed within 30 days of such a change. A redemption
request within that 30 day period must be in writing and signed by each
registered holder of the account with signatures guaranteed. A NOTARY PUBLIC IS
NOT AN ACCEPTABLE GUARANTOR. Telephone redemptions must be in amounts of $500 or
more and may not be made for amounts greater than $50,000.
In order to arrange for telephone redemptions after your account has been
opened or to change the bank account or address designated to receive redemption
proceeds, you must send a written request to the Fund. The request must be
signed by each registered holder of the account with the signatures guaranteed
by a commercial bank or trust company in the United States, a member firm of the
NASD or other eligible guarantor institution. A NOTARY PUBLIC IS NOT AN
ACCEPTABLE GUARANTOR. Further documentation may be requested from corporations,
executors, administrators, trustees and guardians.
Payment of the redemption proceeds for Fund shares redeemed by telephone
where you request wire payment will normally be made in federal funds on the
next business day. Electronically transferred funds will ordinarily arrive at
your bank within two to three banking days after transmission. Once funds are
transmitted, the time and receipt are not within the Fund's control. To change
the designated account, send a written request with the signatures guaranteed to
the Fund. A NOTARY PUBLIC IS NOT AN ACCEPTABLE GUARANTOR. The Fund reserves the
right to delay payment for a period of up to seven days after receipt of the
redemption request. Once the funds are transmitted, the time of receipt and the
availability of the funds are not within the fund's control. There is currently
a $10 fee for each wire redemption. It will be deducted from your account.
The Fund reserves the right to refuse a telephone redemption or exchange
transaction if it believes it is advisable to do so. Procedures for redeeming or
exchanging shares of the Fund by telephone may be modified or terminated by the
Fund at any time. In an effort to prevent unauthorized or fraudulent redemption
or exchange requests by telephone, the Fund has implemented procedures designed
reasonably to assure that telephone instructions are genuine. These procedures
include: requesting verification of certain personal information; recording
telephone transactions; confirming transactions in writing; and restricting
transmittal of redemption proceeds to preauthorized designations. Other
procedures may be implemented from time-to-time. If reasonable procedures are
not implemented, the Fund and/or the Transfer Agent may be liable for any loss
due to unauthorized or fraudulent transactions. In all other cases, you are
liable for any loss for unauthorized transactions.
You should be aware that during periods of substantial economic or market
change, telephone or wire redemptions may be difficult to implement. If you are
unable to contact the Fund by telephone, you may also redeem shares by
delivering or mailing the redemption request to: The Purisima Funds, P.O. Box
731, Milwaukee, Wisconsin 53201. If you wish to send the information via
overnight delivery, you may send it to: The Purisima Funds, 207 East Buffalo
Street, Suite 315, Milwaukee, Wisconsin 53202-5712.
The Fund reserves the right to suspend or postpone redemptions during any
period when: trading on the Exchange is restricted, as determined by the SEC, or
the Exchange is closed for other than customary weekend and holiday closings;
the SEC has by order permitted such suspension; or an emergency, as determined
by the SEC, exists, making disposal of portfolio securities or valuation of net
assets of a Fund not reasonably practicable.
ADDITIONAL REDEMPTION INFORMATION. When a purchase is made by check or
electronic funds transfer and a redemption or exchange is requested shortly
thereafter, the Fund will delay payment of the redemption proceeds or the
completion of an exchange until the purchase check has cleared your bank, which
may take seven business days from the purchase date. This delay allows the Fund
to verify that proceeds used to purchase Fund shares will not be returned due to
insufficient funds and is intended to protect the remaining investors from loss.
Any redemption or transfer of ownership request for corporate accounts will
require the following WRITTEN documentation:
1. A written letter of instruction signed by the required number of authorized
officers, along with their respective positions. For redemption requests in
excess of $50,000, the written request must be signature guaranteed. A
signature guarantee may be obtained from a commercial bank or trust company
in the United States, a member firm of the NASD or other guarantor and
"Signature Guaranteed" must appear with the signature. A NOTARY PUBLIC IS
NOT AN ACCEPTABLE GUARANTOR.
2. A dated copy of your Corporate Resolution that states who is empowered to
act, transfer or sell assets on behalf of the corporation.
3. If the Corporate Resolution is more than 60 days old from the date of the
transaction request, a certificate of Incumbency from the Corporate
Secretary which specifically states the officer or officers named in the
resolution have the authority to act on the account. The Certificate of
Incumbency must be dated within 60 days of the requested transaction. IF
THE CORPORATE RESOLUTION CONFERS AUTHORITY ON OFFICERS BY TITLE AND NOT BY
NAME, THE CERTIFICATE OF INCUMBENCY MUST NAME THE OFFICER(S) AND THEIR
TITLE(S).
Signature guarantees must be signed by an authorized signatory of the bank,
trust company, or member of the firm and "Signature Guaranteed" must appear
with the signature.
When redeeming shares from the Money Market Fund, if you redeem less than
all of the balance of your account, your redemption proceeds will exclude
accrued and unpaid income through the date of the redemption. When redeeming
your entire balance from the Money Market Fund, accrued income will be paid
separately when the income is collected and paid from the Money Market Fund,
typically at the end of the month.
The Fund reserves the right to suspend or postpone redemptions during any
period when: trading on the Exchange is restricted, as determined by the SEC, or
that the Exchange is closed for other than customary weekend and holiday
closings; the SEC has by order permitted such suspension; or an emergency, as
determined by the SEC, exists making disposal of portfolio securities or
valuation of net assets of a Fund not reasonably practicable.
Due to the relatively high cost of maintaining small accounts, if your
account balance falls below the $25,000 minimum as a result of a redemption or
exchange or if you discontinue the Automatic Investment Plan before your account
balance reaches the required minimum, you will be given a 60-day notice to
reestablish the minimum balance or activate an Automatic Investment Plan. If
this requirement is not met, your account may be closed and the proceeds sent to
you. If your account balance in the Money Market Fund is redeemed, accrued
interest will be paid at the end of the following month.
SYSTEMATIC WITHDRAWAL PLAN. The Fund offers a Systematic Withdrawal Plan which
allows you to designate that a fixed amount (limited to those shareholders with
a balance of $100,000 or greater upon commencement of participation in the Plan)
be distributed to you at regular intervals. The required redemption takes place
on the 5th or 20th of each month, but if the day you designate falls on a
Saturday, Sunday or legal holiday, the distribution will be made on the prior
business day. Any changes made to distribution information must be made in
writing and signed by each registered holder of the account with signatures
guaranteed by a commercial bank or trust company in the United States, a member
firm of the NASD or other eligible guarantor institution. A NOTARY PUBLIC IS NOT
AN ACCEPTABLE GUARANTOR.
The Systematic Withdrawal Plan may be terminated by you at any time without
charge or penalty, and the Fund reserves the right to terminate or modify the
Systematic Withdrawal Plan upon 60-days' written notice. Withdrawals involve
redemption of Fund shares and may result in a gain or loss for federal income
tax purposes. An application for participation in the Systematic Withdrawal Plan
may be obtained from the Fund by calling 1-800-871-2665.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
The Fund intends to pay dividends from net investment income, if any, quarterly
and distribute substantially all net realized capital gains, if any, at least
annually. The Fund may make additional distributions if necessary to avoid
imposition of a 4% excise tax imposed on net income or other tax on
undistributed income and gains. You may elect to reinvest all income dividends
and capital gains distributions in shares of the Fund or in cash as designated
on the Purchase Application. You may change your election at any time by sending
written notification to the Fund. The election is effective for distributions
with a dividend record date on or after the date that the Fund receives notice
of the election. If you do not specify an election, all income dividends and
capital gains distributions will automatically be reinvested in full and
fractional shares of the Fund. Shares will be purchased at the net asset value
in effect on the business day after the dividend record date and will be
credited to your account on such date. Reinvested dividends and distributions
receive the same tax treatment as those paid in cash. Dividends and capital
gains distributions, if any, will reduce the net asset value of the Fund by the
amount of the dividend or capital gains distribution, so that a purchase of Fund
shares shortly before the record date for a distribution may result in the
receipt of taxable income that, in essence, represents a return of capital.
SHAREHOLDER REPORTS AND INFORMATION
- -----------------------------------
The Fund will provide the following statements and reports to keep you current
regarding the status of your investment account:
CONFIRMATION STATEMENTS. Except for Automatic Investment Plan transactions,
after each transaction that affects the account balance or account registration,
you will receive a confirmation statement. Participants in the Automatic
Investment Plan will receive quarterly confirmations of all automatic
transactions.
ACCOUNT STATEMENTS. All shareholders will receive quarterly account statements.
FINANCIAL REPORTS. Financial reports are provided to shareholders at least
semi-annually. Annual reports will include audited financial statements. To
reduce Fund expenses, one copy of each report will be mailed to each taxpayer
identification number even though the investor may have more than one account in
the Fund.
If you need information on your account with the Fund or if you wish to
submit any applications, redemption requests, inquiries or notifications, you
should contact: The Purisima Funds, P.O. Box 731, Milwaukee, Wisconsin 53201 or
call 1-800-871-2665. If you wish to send the information via overnight delivery,
you may send it to: The Purisima Funds, 207 East Buffalo Street, Suite 315,
Milwaukee, Wisconsin 53202-5712.
RETIREMENT PLANS
- ----------------
The Fund has a program under which you may establish an Individual Retirement
Account ("IRA") with the Fund and into which you may roll over funds from an
existing IRA. You may obtain additional information regarding establishing such
an account by calling the Fund at 1-800-871-2665.
The Fund may be used as investment vehicles for established defined
contribution plans, including 401(k), profit-sharing and money purchase pension
plans ("Retirement Plans"). For details concerning Retirement Plans, please
call 1-800-871-2665.
SERVICE AND DISTRIBUTION PLAN
- -----------------------------
The Fund has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Fund in
connection with the distribution of its shares at an annual rate of 0.25% of the
Fund's average daily net assets.
Payments may be made by the Fund under the Plan for the purpose of financing
any activity primarily intended to result in the sales of shares of the Fund as
determined by the trustees. Such activities include advertising, compensation of
the Fund's distributor, compensation for sales and sales marketing activities of
others, such as the Adviser, dealers, distributors or financial institutions,
shareholder account servicing, production and dissemination of prospectuses and
sales and marketing materials, and capital or other expenses of associated
equipment, rent, salaries, bonuses, interest and other overhead. To the extent
any activity is one which the Fund may finance without a Plan, the Fund may also
make payments to finance such activity outside of the Plan and not subject to
its limitations. The Adviser may also finance certain distribution activities
out of the Adviser's own resources. Payments under the Plan are not tied
exclusively to actual distribution and service expenses, and the payments may
exceed distribution and service expenses actually incurred.
TAXES
- -----
The Fund intends to qualify and elect to be treated as a regulated investment
company under Subchapter M of the Code. In each taxable year that the Fund so
qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income and net capital
gain that is distributed to shareholders. If in any taxable year the Fund does
not qualify as a regulated investment company, all its taxable income will be
taxable to the Fund at corporate rates and all its distributions will be taxable
to the shareholders as dividends to the extent of the Fund's current and
accumulated earnings and profits.
In years in which the Fund qualifies as a regulated investment company,
dividends from the Fund's investment company taxable income (whether paid in
cash or reinvested in additional shares) are generally taxable to its
shareholders as ordinary income. Distributions of the Fund's net capital gain,
when designated as such, are taxable to its shareholders as long-term capital
gain, regardless of how long they have held their Fund shares and whether such
distributions are paid in cash or reinvested in additional Fund shares. The Fund
provides federal tax information to its shareholders annually, including
information about dividends and other distributions paid during the preceding
year.
The Fund will be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividend payments and redemption and exchange
proceeds if you fail to complete the certification section included as part of
the Purchase Application.
The foregoing is only a summary of some of the important federal income tax
considerations generally affecting the Fund and its shareholders. See "Taxes"
in the Statement of Additional Information for further discussion. There may be
other federal income tax considerations and state or local tax considerations
applicable to you as an investor. You therefore are urged to consult your tax
adviser regarding any tax-related issues.
CAPITAL STRUCTURE
- -----------------
The Trust is a business trust established under Delaware law. The Trust was
established under a Certificate of Trust dated as of June 25, 1996. The Trust's
shares of beneficial interest have a par value of $0.01 per share. Shares of the
Trust may be issued in two or more series or "funds" and each fund may have
more than one class of shares. The Fund is currently authorized to issue a
single class of shares, and the Fund is currently the Trust's only fund. The
Fund's shares may be issued in an unlimited number by the trustees of the Trust.
Shares issued by the Fund have no preemptive, conversion or subscription
rights. Each whole share is entitled to one vote as to any matter on which it is
entitled to vote and each fractional share is entitled to a proportionate
fractional vote. Shareholders have equal and exclusive rights as to dividends
and distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. The Fund, as a separate series of the Trust, votes
separately on matters affecting only the Fund (e.g., approval of the Investment
Management Agreement). The Fund and all future series of the Trust will vote as
a single class on matters affecting all series of the Trust (e.g., election or
removal of trustees). Voting rights are not cumulative, so that the holders of
more than 50% of the shares voting in any election of trustees can, if they so
choose, elect all of the trustees of the Trust. While the Trust is not required
and does not intend to hold annual meetings of shareholders, such meetings may
be called by trustees at their discretion, or upon demand by the holders of 10%
or more of the outstanding shares of the Trust for the purpose of electing or
removing trustees. Shareholders may receive assistance in communicating with
other shareholders in connection with the election or removal of trustees
pursuant to the provisions of Section 16(c) of the 1940 Act.
As of the date of this Prospectus, Kenneth L. Fisher owned all of the
outstanding shares of the Fund. It is contemplated that the public offering of
the shares of the Fund will reduce Mr. Fisher's holdings to less than 5% of the
total shares outstanding.
TRANSFER AND DIVIDEND DISBURSING AGENT,
CUSTODIAN AND INDEPENDENT ACCOUNTANTS
- ---------------------------------------
Sunstone Investor Services, LLC, 207 East Buffalo Street, Suite 315, Milwaukee,
Wisconsin 53202, has been retained to act as the Fund's Transfer and Dividend
Disbursing Agent. Sunstone Investor Services, LLC is an affiliate of Sunstone,
the Fund's administrator and distributor. See "Management." UMB Bank, n.a.,
which has its principal address at 928 Grand Avenue, Kansas City, Missouri
64141, has been retained to act as Custodian of the Fund's investments. Neither
the Transfer and Dividend Disbursing Agent nor the Custodian has any part in
deciding the Fund's investment policies or which securities are to be purchased
or sold for the Fund's portfolio. Price Waterhouse LLP has been selected to
serve as independent accountants of the Trust for the fiscal year ending August
30, 1997.
FUND PERFORMANCE
- ----------------
From time-to-time, the Fund may advertise its "average annual total return"
over various periods of time. An average annual total return refers to the rate
of return which, if applied to an initial investment at the beginning of a
stated period and compounded over the period, would result in the redeemable
value of the investment at the end of the stated period assuming reinvestment of
all dividends and distributions and reflecting the effect of all recurring fees.
An investor's principal in the Fund and the Fund's return are not guaranteed and
will fluctuate according to market conditions. When considering "average"
total return figures for periods longer than one year, you should note that the
Fund's annual total return for any one year in the period might have been
greater or less than the average for the entire period. The Fund also may use
"aggregate" total return figures for various periods, representing the
cumulative change in value of an investment in the Fund for a specific period
(again reflecting changes in the Fund's share price and assuming reinvestment of
dividends and distributions).
The Fund may quote the Fund's average annual total and/or aggregate total
return for various time periods in advertisements or communications to
shareholders. The Fund may also compare its performance to that of other mutual
funds with similar investment objectives and to stock and other relevant indices
or to rankings prepared by independent services or industry publications. For
example, the Fund's total return may be compared to data prepared by Lipper
Analytical Services, Inc., Morningstar, Value Line Mutual Fund Survey and CDA
Investment Technologies, Inc. Total return data as reported in such national
financial publications as THE WALL STREET JOURNAL, THE NEW YORK TIMES,
INVESTOR'S BUSINESS DAILY, USA TODAY, BARRON'S, MONEY, and FORBES as well as in
publications of a local or regional nature, may be used in comparing the Fund's
performance.
The Fund's total return may also be compared to such indices as the Dow
Jones Industrial Average, Standard & Poor's 500 Composite Index, NASDAQ
Composite OTC Index or NASDAQ Industrials Index, Consumer Price Index, Russell
2000 Index, Salomon Brothers High Grade Bond Index and the Morgan Stanley
Europe, Australia, Far East Index. Further information on performance
measurement may be found in the Statement of Additional Information.
Performance quotations of the Fund represent the Fund's past performance and
should not be considered as representative of future results. The investment
return and principal value of an investment in the Fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The methods used to compute the Fund's total return and yield are
described in more detail in the Statement of Additional Information.
For Fund information, prices, literature, account balances
and other information about your Purisima Funds account,
call 1-800-871-2665.
THE PURISIMA FUNDS
P.O. Box 731
Milwaukee, WI 53201
PURISIMA TOTAL RETURN FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated October 1, 1996, is meant
to be read in conjunction with the Purisima Total Return Fund Prospectus dated
October 1, 1996 (hereinafter referred to as the "Fund") and is incorporated
by reference in its entirety into the Prospectus. Because this Statement of
Additional Information is not itself a prospectus, no investment in shares of
the Fund should be made solely upon the information contained herein. Copies of
the Prospectus for the Fund may be obtained by writing the Fund, P.O. Box 731,
Milwaukee, Wisconsin 53201, or calling 1-800-871-2665. Capitalized terms used
but not defined herein have the same meanings as in the Prospectus.
TABLE OF CONTENTS
-----------------
Page
----
ADDITIONAL INVESTMENT INFORMATION
INVESTMENT RESTRICTIONS..........................................
ADDITIONAL TRUST INFORMATION.....................................
Trustees and Officers.......................................
Control Persons and Principal Holders of Securities.........
Investment Adviser..........................................
Administrator...............................................
Custodian, Transfer Agent and Dividend Paying Agent.........
Legal Counsel ..............................................
Independent Accountants.....................................
DISTRIBUTION OF SHARES...........................................
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................
TAXES............................................................
DESCRIPTION OF SHARES............................................
INDIVIDUAL RETIREMENT ACCOUNTS...................................
PERFORMANCE INFORMATION..........................................
OTHER INFORMATION................................................
FINANCIAL STATEMENTS.............................................
APPENDIX A (Description of Securities Ratings)...................
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 FUND OR THE DISTRIBUTOR. THE PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
ADDITIONAL INVESTMENT INFORMATION
The investment objective of the Fund is to produce a high level of total
return. Because of the risks inherent in all investments, there can be no
assurance that the Fund will meet its objective. The Fund is not intended by
itself to constitute a balanced investment program.
The following information supplements the investment policies of the Fund
as set forth in the Prospectus. Unless specifically designated as a
"fundamental" policy (which may be changed only with the approval by a
majority of the Fund's outstanding shares, as defined in the Investment Company
Act of 1940), all investment policies described below may be changed by the
Fund's Board of Trustees without shareholder approval.
UNITED STATES GOVERNMENT OBLIGATIONS. The Fund may invest in Treasury
securities which differ only in their interest rates, maturities and times of
issuance. Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years.
Obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by any of the following: (a) the full faith and
credit of the U.S. Treasury (for example, Ginnie Mae Certificates); (b) the
right of the issuer to borrow from the Treasury (such as obligations of the
Federal Home Loan Banks); (c) the discretionary authority of the U.S. Government
to purchase certain obligations of the agency or instrumentality (such as those
issued by Fannie Mae); and (d) only the credit of the agency or instrumentality
itself (such as those issued by the Student Loan Marketing Association). While
the U.S. Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always do
so because it is not so obligated.
MONEY MARKET INSTRUMENTS. The Fund may invest in a variety of money market
instruments for temporary defensive purposes, pending investment in other types
of securities, to meet anticipated redemption requests and/or to retain the
flexibility to respond promptly to changes in market and economic conditions.
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. Certificates of deposit are generally negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may also be subject to early withdrawal penalties
that vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party, although there is
no market for such deposits. Bank notes and bankers' acceptances rank junior to
deposit liabilities of the bank and pari passu with other senior, unsecured
obligations of the bank. Bank notes are classified as "other borrowings" on a
bank's balance sheet, while deposit notes and certificates of deposit are
classified as deposits. Bank notes are not insured by the Federal Deposit
Insurance Corporation or any other insurer. Deposit notes are insured by the
Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.
REPURCHASE AGREEMENTS. The Fund may agree to purchase portfolio securities
from financial institutions subject to the seller's agreement to repurchase them
at a mutually agreed upon date and price ("repurchase agreements"). Although
the securities subject to a repurchase agreement may bear maturities exceeding
one year, settlement for the repurchase agreement will never be more than one
year after the Fund's acquisition of the securities and normally will be within
a shorter period of time. Securities subject to repurchase agreements are held
either by the Fund's custodian or subcustodian (if any), or in the Federal
Reserve/Treasury Book-Entry System. The seller under a repurchase agreement
will be required to maintain the value of the securities subject to the
agreement in an amount exceeding the repurchase price (including accrued
interest). Repurchase agreements may be considered loans to the seller,
collateralized by the underlying securities. The risk to the Fund is limited to
the ability of the seller to pay the agreed upon sum on the repurchase date; in
the event of default, the repurchase agreement provides that the Fund is
entitled to sell the underlying collateral. If the value of the collateral
declines after the agreement is entered into, however, and if the seller
defaults under a repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss of
both principal and interest. The Adviser monitors the value of the collateral
at the time the agreement is entered into and at all times during the term of
the repurchase agreement in an effort to determine that the value of the
collateral always equals or exceeds the agreed-upon repurchase price to be paid
to the Fund. If the seller were to be subject to a federal bankruptcy
proceeding, the ability of the Fund to liquidate the collateral could be delayed
or impaired because of certain provisions of the bankruptcy laws.
ASSET-BACKED SECURITIES. The Fund may purchase asset-backed securities,
which are securities backed by mortgages, installment contracts, credit card
receivables or other assets. Asset-backed securities represent interests in
"pools" of assets in which payments of both interest and principal on the
securities are made monthly, thus in effect "passing through" monthly payments
made by the individual borrowers on the assets that underlie the securities, net
of any fees paid to the issuer or guarantor of the securities. The average life
of asset-backed securities varies with the maturities of the underlying
instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage pre-payments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to predict
precisely. Asset-backed securities acquired by the Fund may include
collateralized mortgage obligations ("CMOs") issued by private companies.
The Fund may acquire several types of mortgage-backed securities, including
guaranteed mortgage pass-through certificates, which provide the holder with a
pro rata interest in the underlying mortgages, and CMOs, which provide the
holder with a specified interest in the cash flow of a pool of underlying
mortgages. Issuers of CMOs ordinarily elect to be taxed as pass-through
entities known as real estate mortgage investment conduits ("REMICs"). CMOs
are issued in multiple classes, each with a specified fixed or floating interest
rate and a final distribution date. The relative payment rights of the various
CMO classes may be structured in a variety of ways. The Fund will not purchase
"residual" CMO interests, which normally exhibit greater price volatility.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities
guaranteed by the GNMA include GNMA Mortgage Pass-Through Certificates (also
known as "Ginnie Maes"), which are guaranteed as to the timely payment of
principal and interest by GNMA and backed by the full faith and credit of the
United States. GNMA is a wholly-owned U.S. government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-backed securities issued by the
FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes"), which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States, but are
supported by the discretionary authority of the U.S. Treasury to provide certain
credit support. FNMA is a government-sponsored organization owned entirely by
private stockholders. Fannie Maes are guaranteed as to timely payment of the
principal and interest by FNMA. Mortgage-related securities issued by the FHLMC
include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs"
or "PCs"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by Federal Home Loan
Banks. Freddie Macs are not guaranteed and do not constitute a debt or
obligation of the United States or any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by FHLMC.
FHLMC guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
decrease, yield to maturity. In calculating the average weighted maturity of
the Fund, the maturity of asset-backed securities will be based on estimates of
average life.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social factors. In general,
the collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. Like other fixed income securities, when interest rates rise the
value of an asset-backed security generally will decline; however, when interest
rates decline, the value of an asset-backed security with prepayment features
may not increase as much as that of other fixed income securities.
ZERO-COUPON, STEP-COUPON AND PAY-IN-KIND SECURITIES. The Fund may invest
in zero-coupon, step-coupon, and pay-in-kind securities. These securities are
debt securities that do not make regular interest payments. Zero-coupon and
step-coupon securities are sold at a deep discount to their face value. Pay-in-
kind securities pay interest through the issuance of additional securities.
Because such securities do not pay current income, the price of these securities
can be volatile when interest rates fluctuate. While these securities do not
pay current cash income, federal income tax law requires the holders of taxable
zero-coupon, step-coupon, and certain pay-in-kind securities to report as
interest each year the portion of the original issue discount (or deemed
discount) on such securities accruing that year. In order to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund may be required to distribute a portion of such
discount and may be required to dispose of other portfolio securities, which may
occur in periods of adverse market prices, in order to generate cash to meet
these distribution requirements.
YIELDS AND RATINGS. The yields on certain obligations, including the money
market instruments in which the Fund may invest, are dependent on a variety of
factors, including general economic conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P, Moody's, and other rating agencies represent their respective opinions as
to the quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities (i.e., securities that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which the
Fund has valued the securities). The Board of Trustees or its delegate has the
ultimate authority to determine which securities are liquid or illiquid for
purposes of this limitation. Certain securities exempt from registration or
issued in transactions exempt from registration ("restricted securities") under
the Securities Act of 1933, as amended ("Securities Act"), that may be resold
pursuant to Rule 144A or Regulation S under the Securities Act, may be
considered liquid. The Trustees have delegated to the Adviser the day-to-day
determination of the liquidity of a security, although it has retained oversight
and ultimate responsibility for such determinations. Certain securities are
deemed illiquid by the Securities and Exchange Commission including repurchase
agreements maturing in greater than seven days and options not listed on a
securities exchange or not issued by the Options Clearing Corporation. These
securities will be treated as illiquid and subject to the Fund's limitation on
illiquid securities.
Restricted securities may be sold in privately negotiated or other exempt
transactions, qualified non-U.S. transactions, such as under Regulation S, or in
a public offering with respect to which a registration statement is in effect
under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
time may elapse between the decision to sell and the sale date. If, during such
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed - when it decided to sell. Restricted securities
will be priced at fair value as determined in good faith by the Trustees.
If through the appreciation of illiquid securities or the depreciation of
liquid securities, more than 15% of the value of the Fund's net assets are
invested in illiquid assets, including restricted securities which are not
readily marketable, the Fund will take such steps as it deems advisable, if any,
to reduce the percentage of such securities to 15% or less of the value of its
net assets.
WARRANTS. The Fund may purchase warrants and similar rights, which are
privileges issued by a corporation enabling the owners to subscribe to and
purchase a specified number of shares of the corporation at a specified price
during a specific period of time. The purchase of warrants involves the risk
that the Fund could lose the purchase price of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security. The Fund
will not invest more than 5% of its net assets, taken at market value, in
warrants, or more than 2% of its net assets, taken at market value, in warrants
not listed on the New York or American Stock Exchanges or a major foreign
exchange. Warrants attached to other securities acquired by the Fund are not
subject to this restriction.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY
TRANSACTIONS. The Fund may purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment (sometimes called delayed-
delivery) basis. These transactions involve a commitment by the Fund to
purchase or sell securities at a future date. The price of the underlying
securities and the date when the securities will be delivered and paid for (the
settlement date) are fixed when the transaction is negotiated. When-issued
purchases and forward commitment transactions are normally negotiated directly
with the other party. The Fund will purchase securities on a when-issued basis
or sell securities on a forward commitment basis only with the intention of
completing the transaction and actually purchasing or selling the securities.
If deemed advisable as a matter of investment strategy, however, the Fund may
dispose of or renegotiate a commitment after entering into it. The Fund also
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date.
When the Fund purchases securities on a when-issued, delayed-delivery or
forward commitment basis, the Fund's custodian or subcustodian will maintain in
a segregated account cash, U.S. government securities or other high-grade debt
obligations having a value (determined daily) at least equal to the amount of
the Fund's purchase commitments.
HEDGING STRATEGIES. The Fund may use various options transactions for the
purpose of hedging or earning additional income. There can be no assurance that
such efforts will succeed. The Fund may write (i.e. sell) call and put options,
and buy put or call options. These options may relate to particular securities
or stock or bond indexes and may or may not be listed on a securities exchange
and may or may not be issued by the Options Clearing Corporation. The Fund will
not purchase put and call options where the aggregate premiums on its
outstanding options exceed 5% of its net assets at the time of purchase, and
will not write options on more than 25% of the value of its net assets (measured
at the time an option is written).
Hedging instruments on securities generally are used to hedge against price
movements in one or more particular securities positions that the Fund owns or
intends to acquire. Hedging instruments on stock indices, in contrast,
generally are used to hedge against price movements in broad equity market
sectors in which the Fund has invested or expects to invest. The use of hedging
instruments is subject to applicable regulations of the Securities and Exchange
Commission, the several options exchanges upon which they are traded and various
state regulatory authorities. In addition, the Fund's ability to use hedging
instruments may be limited by tax considerations.
GENERAL. The Fund may purchase and write (i.e. sell) put and call options.
Such options may relate to particular securities or securities indices, and may
or may not be listed on a domestic or foreign securities exchange and may or may
not be issued by the Options Clearing Corporation. Options trading is a highly
specialized activity that entails greater than ordinary investment risk.
Options may be more volatile than the underlying instruments, and therefore, on
a percentage basis, an investment in options may be subject to greater
fluctuation than an investment in the underlying instruments themselves.
A call option for a particular security gives the purchaser of the option
the right to buy, and the writer (seller) the obligation to sell, the underlying
security at the stated exercise price at any time (or, in some cases, on certain
specified dates) prior to the expiration of the option, regardless of the market
price of the security. A put option for a particular security gives the
purchaser the right to sell the security at the stated exercise price at any
time prior to the expiration date of the option, regardless of the market price
of the security. The premium paid to the writer is in consideration for
undertaking the obligation under the option contract.
Securities index options are put options and call options on various
securities indexes. In most respects, they are identical to listed options on
common stocks or bonds. The primary difference between securities options and
index options occurs when index options are exercised. In the case of
securities options, the underlying security, is delivered. However, upon the
exercise of an index option, settlement does not occur by delivery of the
securities comprising the index. The option holder who exercises the index
option receives an amount of cash if the closing level of the securities index
upon which the option is based is greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. This amount of
cash is equal to the difference between the closing price of the securities
index and the exercise price of the option expressed in dollars times a
specified multiple. A securities index fluctuates with changes in the market
value of the stocks included in the index. For example, some stock index
options are based on a broad market index, such as the Standard & Poor's 500 or
the Value Line Composite Index, or a narrower market index, such as the Standard
& Poor's 100. Indexes may also be based on an industry or market segment, such
as the AMEX Oil and Gas Index or the Computer and Business Equipment Index.
Options on securities indexes are currently traded on the following exchanges:
the Chicago Board Options Exchange, the New York Stock Exchange, the American
Stock Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange.
The Fund's obligation to sell an instrument subject to a call option
written by it, or to purchase an instrument subject to a put option written by
it, may be terminated prior to the expiration date of the option by the Fund's
execution of a closing purchase transaction, which is effected by purchasing on
an exchange an option of the same series (i.e., same underlying instrument,
exercise price and expiration date) as the option previously written. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying instrument from being called, to
permit the sale of the underlying instrument or to permit the writing of a new
option containing different terms on such underlying instrument. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the Fund will have
incurred a loss in the transaction. There is no assurance that a liquid
secondary market will exist for any particular option. An option writer, unable
to effect a closing purchase transaction, will not be able to sell the
underlying instrument or liquidate the assets held in the segregated account
until the option expires or the optioned instrument is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline or appreciation in the instrument during such period.
If an option purchased by the Fund expires unexercised, the Fund realizes a
loss equal to the premium paid. If the Fund enters into a closing sale
transaction on an option purchased by it, the Fund will realize a gain if the
premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by
the Fund expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold). If an option written by the Fund is exercised, the proceeds of the sale
will be increased by the net premium originally received and the Fund will
realize a gain or loss.
CERTAIN RISKS REGARDING OPTIONS. There are a number of special risks
associated with transactions in options. For example, there are significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction to not
achieve its objectives. In addition, a liquid secondary market for particular
options, whether traded over-the-counter or on an exchange, may be absent for
various reasons, including: there may be insufficient trading interest in
certain options; restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options or underlying securities or currencies; unusual or unforeseen
circumstances may interrupt normal operations on an exchange; the facilities of
an exchange or the Options Clearing Corporation may not at all times be adequate
to handle current trading value; or one or more exchanges could, for economic or
other reasons, decide or be compelled to discontinue the trading of options (or
a particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
Successful use by the Fund of options on stock indexes will be subject to
the ability of the Adviser to correctly predict movements in the directions of
the stock market. This requires different skills and techniques than predicting
changes in the prices of individual securities. In addition, the Fund's ability
to effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline, through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements of the securities held by
the Fund. Because the Fund's securities will not duplicate the components of
an index, the correlation will not be perfect. Consequently, the Fund will bear
the risk that the prices of its securities being hedged will not move in the
same amount as the prices of its put options on the stock indexes. It is also
possible that there may be a negative correlation between the index and the
Fund's securities which would result in a loss on both such securities and the
options on securities indexes acquired by the Fund.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets. The purchase of options is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. The purchase of
securities index options involves the risk that the premium and transaction
costs paid by the Fund in purchasing an option will be lost as a result of
unanticipated movements in prices of the securities comprising the securities
index on which the option is based.
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If the Fund
is unable to close out a call option on securities that it has written before
the option is exercised, the Fund may be required to purchase the optioned
securities in order to satisfy its obligation under the option to deliver such
securities. If the Fund is unable to effect a closing sale transaction with
respect to options on securities that it has purchased, it would have to
exercise the option in order to realize any profit and would incur transaction
costs upon the purchase and sale of the underlying securities.
COVER FOR OPTIONS POSITIONS. Transactions using options (other than
options that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options or (2)
cash, receivables and short-term debt securities with a value sufficient at all
times to cover its potential obligations not covered as provided in (1) above.
The Fund will comply with Securities and Exchange Commission guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, U.S. government securities or other liquid, high-grade debt
securities in a segregated account with its Custodian in the prescribed amount.
Under current SEC guidelines, the Fund will segregate assets to cover
transactions in which the Fund writes or sells options.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding option is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of the Fund's
assets to cover or in segregated accounts could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
INVESTMENT COMPANIES. The Fund intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (a) not more than 5%
of the value of the Fund's total assets will be invested in the securities of
any one investment company; (b) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group; and (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by the Trust as a whole.
CALCULATION OF PORTFOLIO TURNOVER RATE. The portfolio turnover rate for
the Fund is calculated by dividing the lesser of purchases or sales of portfolio
investments for the reporting period by the monthly average value of the
portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of shares and by requirements which
enable the Fund to receive favorable tax treatment. The Fund is not restricted
by policy with regard to portfolio turnover and will make changes in its
investment portfolio from time to time as business and economic conditions as
well as market prices may dictate. It is anticipated the portfolio turnover
rate for the Fund will generally not exceed 150%. However, this should not be
considered as a limiting factor.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions consistent with its
investment objective. The following restrictions supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment restriction
states a maximum percentage of the Fund's assets that may be invested in any
security or other asset, such percentage restriction will be determined
immediately after and as a result of the Fund's acquisition of such security or
other asset. Accordingly, any subsequent change in values, net assets, or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment limitations except with respect to the
Fund's restrictions on borrowings as set forth in fundamental restriction 7
below.
The Fund's fundamental restrictions cannot be changed without the approval
of the holders of the lesser of: (i) 67% of the Fund's shares present or
represented at a shareholders meeting at which the holders of more than 50% of
such shares are present or represented; or (ii) more than 50% of the outstanding
shares of the Fund.
THE FOLLOWING ARE THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS.
The Fund may not:
1. Issue senior securities, except as permitted under the Investment
Company Act of 1940 (the "1940 Act"); provided, however, the Fund may engage in
transactions involving options, futures and options on futures contracts.
2. Lend money or securities (except by purchasing debt securities or
entering into repurchase agreements or lending portfolio securities).
3. With respect to seventy-five percent (75%) of its total assets,
purchase (a) the securities of any issuer (except securities of the U.S.
government or any agency or instrumentality thereof), if such purchase would
cause more than five percent (5%) of the value of the Fund's total assets to be
invested in securities of any one issuer or (b) the securities of any issuer if
such purchase would cause the Fund to own more than ten percent (10%) of the
outstanding voting securities of any one issuer.
4. Purchase the securities of any issuer if, as a result, 25% or more of
the value of its total assets, determined at the time an investment is made,
exclusive of U.S. government securities, are in securities issued by companies
primarily engaged in the same industry.
5. Act as an underwriter or distributor of securities other than shares of
the Fund except to the extent that the Fund's participation as part of a group
in bidding or by bidding alone, for the purchase of permissible investments
directly from an issuer or selling shareholders for the Fund's own portfolio may
be deemed to be an underwriting, and except to the extent that the Fund may be
deemed an underwriter under the Securities Act by virtue of disposing of
portfolio securities.
6. Purchase or sell real estate (but this shall not prevent the Fund from
investing in securities that are backed by real estate or issued by companies
that invest or deal in real estate or in participation interests in pools of
real estate mortgage loans exclusive of investments in real estate limited
partnerships).
7. Borrow money, except that the Fund may borrow money from a bank for
temporary or emergency purposes (not for leveraging) in an amount not exceeding
33 1/3% of the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed 33 1/3% of the
Fund's total assets by reason of a decline in net asset value will be reduced
within three days to the extent necessary to comply with the 33 1/3% limitation.
Transactions involving options, futures and options on futures, will not be
deemed to be borrowings if properly covered by a segregated account where
appropriate.
8. Purchase or sell physical commodities or commodities contracts unless
acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from engaging in transactions involving foreign
currencies, futures contracts, options on futures contracts or options, or from
investing in securities or other instruments backed by physical commodities).
THE FOLLOWING INVESTMENT RESTRICTIONS ARE NOT FUNDAMENTAL, AND MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL.
The Fund may not:
1. Purchase warrants, valued at the lower of cost or market, in excess of
5% of the Fund's net assets. Included in that amount, but not to exceed 2% of
net assets, are warrants whose underlying securities are not traded on principal
domestic or foreign exchanges. Warrants acquired by the Fund in units or
attached to securities are not subject to these restrictions.
2. Purchase securities of other investment companies except to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
3. Make investments for the purpose of exercising control or management of
any company except that the Fund or its agent may vote portfolio securities in
their discretion.
4. Invest in securities of issuers which have a record of less than three
(3) years continuous operation, including the operation of any predecessor
business of a company which came into existence as a result of a merger,
consolidation, reorganization or purchase of substantially all of the assets of
such predecessor business, if such purchase would cause the value of the Fund's
investments in all such companies to exceed 10% of the value of its total
assets.
5. Acquire illiquid securities if, as a result of such investments, more
than fifteen percent (15%) of the Fund's net assets (taken at market value at
the time of each investment) would be invested in illiquid securities.
6. Purchase securities on margin (except to obtain such short-term credits
as are necessary for the clearance of purchases and sales of securities) or
participate in a joint trading account; provided, however, the Fund may (i)
purchase or sell futures contracts and options thereon, (ii) make initial and
variation margin payments in connection with purchases or sales of futures
contracts or options on futures contracts, (iii) write or invest in put or call
options on securities and indexes, and (iv) engage in foreign currency
transactions. (The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Adviser to
save brokerage costs or average prices among them is not deemed to result in a
joint securities trading account.)
7. Borrow money except for temporary bank borrowings (not in excess of
five percent (5%) of the value of its total assets) for emergency or
extraordinary purposes, or engage in reverse repurchase agreements, or pledge
any of its assets except to secure borrowings and only to an extent not greater
than ten percent (10%) of the value of the Fund's net assets; provided, however,
the Fund may engage in transactions involving options. The Fund will not
purchase any security while borrowings representing more than 5% of its total
assets are outstanding.
8. Purchase any interest in any oil, gas or any other mineral exploration
or development program, including any oil, gas or mineral leases.
The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of shares of the Fund in certain states. Should
the Fund determine that a commitment is no longer in the best interest of the
Fund and its shareholders, the Fund reserves the right to revoke the commitment
by terminating the sale of Fund shares in the state involved.
In determining industry classification with respect to the Fund, the
Adviser intends to use the industry classification titles in the Standard
Industrial Classification Manual.
A guarantee of a security is not deemed to be a security issued by the
guarantor when the value of all securities issued and guaranteed by the
guarantor, and owned by the Fund, does not exceed 10% of the value of the Fund's
total assets.
ADDITIONAL TRUST INFORMATION
TRUSTEES AND OFFICERS. Information regarding the Board of Trustees and
officers of the Trust, including their principal business occupations during at
least the last five years, is set forth below. Each Trustee who is an
"interested person" of the Trust or the Adviser as defined in the 1940 Act, is
indicated by an asterisk. Except where otherwise indicated, each of the
individuals below has served in his or her present capacity with the Trust since
July 1996. The address of each of the officers and Trustees is c/o The Purisima
Funds, 13100 Skyline Blvd., Woodside, CA 94062-4547.
*KENNETH L. FISHER, PRESIDENT AND TRUSTEE
Mr. Fisher is the Chairman, Chief Executive Officer and majority
shareholder of the Adviser, and has served in such capacities since the
incorporation of the Adviser in 1986. Prior thereto, he was the founder of
Fisher Investments, a sole proprietorship which commenced operations in 1978.
SHERRILYN A. FISHER, ASSISTANT SECRETARY
Ms. Fisher is Senior Vice President and Corporate Secretary of the
Adviser. Ms. Fisher has been employed by the Adviser since 1984.
PIERSON E. CLAIR III, TRUSTEE
Mr. Clair is Vice President of Blummer Chocolate Company where he
has been employed since 1970 and served as Vice President since 1980. Mr.
Clair is a director of Signature Foods,Inc. Mr. Clair was appointed and
elected as a Trustee of the Trust on September 26, 1996.
BRYAN F. MORSE, TRUSTEE
Mr. Morse is the sole proprietor of Bryan F. Morse, RIA, a
registered investment adviser. He has served in that capacity since 1990.
Mr. Morse was appointed and elected as a Trustee of the Trust on
September 26, 1996.
GROVER T. WICKERSHAM, TRUSTEE
Mr. Wickersham is an attorney with Grover T. Wickersham PC, a law
firm, and has served in such capacity since ___________. Mr. Wickersham
is also Chairman of Oxcal _____ and has served in such capacity since
January 1996. Mr. Wickersham was appointed and elected as a Trustee of
the Trust on September 26, 1996.
The Trustees of the Trust who are officers of the Adviser receive no
remuneration from the Trust. Each of the other Trustees is paid a fee of $500
for each meeting attended and is reimbursed for the expenses of attending
meetings. The table below sets forth the estimated compensation of the Trustees
for the fiscal year ending August 31, 1997.
COMPENSATION TABLE
------------------
Pension or
Retirement Total
Benefits Estimated Compensation
Accrued As Annual from
Aggregate Part of Benefits Company
Compensation Company Upon Paid to
Name of Person from Company Expenses Retirement Directors
- -------------- ------------ -------- ---------- ---------
Mr. Fisher $ 0 $0 $0 $ 0
Mr. Clair $2000 $0 $0 $2000
Mr. Morse $2000 $0 $0 $2000
Mr. Wickersham $2000 $0 $0 $2000
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES. As of the date hereof,
Kenneth L. Fisher owned of record 100% of the outstanding shares of the
Fund and therefore controlled the Fund. Shareholders with a controlling interest
could effect the outcome of proxy voting or the direction of management of the
Trust. It is contemplated that the public offering of the shares of the Fund
will reduce Mr. Fisher's holdings to less than 5% of the total shares
outstanding.
INVESTMENT ADVISER. The investment adviser to the Fund is Fisher
Investments, Inc. (the "Adviser"). Mr. Kenneth L. Fisher is the founder,
Chairman and Chief Executive Officer of the Adviser and is a majority
shareholder of the Adviser. As such, he controls the Adviser.
Pursuant to the Investment Management Agreement entered into between the
Trust on behalf of the Fund and the Adviser (the "Investment Management
Agreement"), the Adviser determines the composition of the Fund's portfolio, the
nature and timing of the changes to the Fund's portfolio, and the manner of
implementing such changes. The Adviser also (a) provides the Fund with
investment advice, research and related services for the investment of its
assets, subject to such directions as it may receive from the Board of Trustees;
(b) pays all of the Trust's executive officers' salaries and executive expenses
(if any); (c) pays all expenses incurred in performing its investment advisory
duties under the Investment Management Agreement; and (d) furnishes the Fund
with office space and certain administrative services. The services of the
Adviser or any affiliate thereof are not deemed to be exclusive and the Adviser
or any affiliate thereof may provide similar services to other series of the
Trust, other investment companies and other clients, and may engage in other
activities. The Fund may reimburse the Adviser (on a cost recovery basis only)
for any services performed for the Fund by the Adviser outside its duties under
the Investment Management Agreement.
The Investment Management Agreement is dated as of October __, 1996. The
Investment Management Agreement has an initial term of two years and thereafter
is required to be approved annually by the Board of Trustees of the Trust or by
vote of a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act). Each annual renewal must also be approved by the vote of a
majority of the Trustees who are not parties to the Investment Management
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Investment Management
Agreement was approved by the vote of a majority of the Trustees who are not
parties to the Investment Management Agreement or interested persons of any such
party on September 26, 1996 and by the initial shareholder of the Fund on
September 26, 1996. The Investment Management Agreement is terminable without
penalty on 60-days' written notice by the Trustees, by vote of a majority of the
Fund's outstanding voting securities, or by the Adviser, and will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
As compensation for its services, the Fund pays to the Adviser a monthly
advisory fee at the annual rate specified in the Prospectus. The organizational
expenses of the Fund were advanced by the Adviser and will be reimbursed by the
Fund over a period of not more than 60 months.
The Investment Management Agreement requires the Adviser to reimburse the
Fund in the event that the expenses and charges payable by the Fund in any
fiscal year, including the advisory fee but excluding taxes, interest, brokerage
commissions, and similar fees, exceed a percentage of the average net asset
value of the Fund for such year which is the most restrictive percentage
provided by the state laws of the various states in which the Fund's shares are
qualified for sale. As of the date of this Statement of Additional Information,
the percentage applicable to the Fund is 2 1/2% on the first $30,000,000 of its
average net assets, 2% on the next $70,000,000 of its average net assets and 1
1/2% on net assets in excess of $100,000,000. Additionally, the Adviser
voluntarily agreed to reimburse the Fund to the extent aggregate annual
operating expenses as described above exceeded 1.50% of the average daily net
assets of the Fund for its first fiscal year. The Adviser may voluntarily
continue to waive all or a portion of the advisory fees otherwise payable by the
Fund. Such a waiver may be terminated at any time in the Adviser's discretion.
Reimbursement of expenses in excess of the applicable limitation will be paid to
the Fund by reducing the Adviser's fee, subject to later adjustment. The Adviser
may from time to time voluntarily absorb expenses for the Fund in addition to
the reimbursement of expenses in excess of the foregoing.
The Investment Management Agreement permits the Adviser to seek
reimbursement of any reductions made to its management fee and payments made to
limit expenses which are the responsibility of the Fund within the three-year
period following such reduction, subject to the Fund's ability to effect such
reimbursement and remain in compliance with applicable expense limitations.
Such reimbursement may be paid prior to the Fund's payment of current
expenses if so requested by the Adviser even if such pracice may require the
Adviser to waive, reduce, or absorb current Fund expenses. Any such
management fee or expense reimbursement will be accounted for on the
financial statements of the Fund as a contingent liability of the Fund 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.
The Investment Management Agreement provides that the Adviser shall not be
liable to the Fund or its shareholders for any error of judgment or mistake of
law or for anything other than willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations or duties.
ADMINISTRATOR. Sunstone Financial Group, Inc. (the "Administrator" or
"Sunstone") provides various administrative and fund accounting services to
the Fund (which include compliance, regulatory, fund accounting and other
services) pursuant to an Administration and Fund Accounting Agreement with the
Trust on behalf of the Fund. The Administration and Fund Accounting Agreement
will remain in effect for an initial one-year term ending October ___, 1997
and thereafter continue for successive annual periods unless earlier terminated.
The Administration and Fund Accounting Agreement may be terminated on not less
than 90-days' notice after the expiration of the initial term, without the
payment of any penalty, by the Board of Trustees of the Trust or by the
Administrator. Under the Administration and Fund Accounting Agreement, the
Administrator is not liable for any loss suffered by the Fund or its
shareholders in connection with the performance of the Administration and Fund
Accounting Agreement, except a loss resulting from willful misfeasance, bad
faith or negligence on the part of the Administrator in the performance of
its duties. The Administration and Fund Accounting Agreement also provides that
the Administrator may provide similar services to others including other
investment companies.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT. UMB Bank, N.A.
(the "Custodian") serves as the custodian and Sunstone Investor Services,
LLC serves as the transfer and dividend paying agent for the Fund. Under the
terms of the respective agreements, the Custodian is responsible for the receipt
and delivery of the Fund's securities and cash, and Sunstone Investor Services,
LLC is responsible for processing purchase and redemption requests for Fund
shares as well as the recordkeeping of ownership of the Fund's shares, payment
of dividends as declared by the Trustees and the issuance of confirmations of
transactions and annual statements to shareholders. The Custodian and Sunstone
Investor Services, LLC do not exercise any supervisory functions over the
management of the Trust or the Fund or the purchase and sale of securities.
LEGAL COUNSEL. The validity of the shares offered by the Prospectus will be
passed on by Heller Ehrman White & McAuliffe, 333 Bush Street, San Francisco,
California 94104.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP are the independent
accountants for the Fund. They are responsible for performing an audit of the
Fund's year-end financial statements as well as providing accounting and tax
advice to the management of the Trust.
DISTRIBUTION OF SHARES
Sunstone serves as distributor of the Fund pursuant to a Distribution
Agreement with the Trust on behalf of the Fund (the "Distribution Agreement").
Shares may also be sold by authorized dealers who have entered into dealer
agreements with Sunstone or the Trust. The Distribution Agreement is dated as
of October ___, 1996. The Agreement has an initial term of one year and
thereafter is required to be approved annually by the Board of Trustees of the
Trust or by vote of a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act). Each annual renewal must also be approved by the vote
of a majority of the Trustees who are not parties to the Distribution Agreement
or interested persons of any such party, case in person at a meeting called for
the purpose of voting on such approval. The Agreement was approved by the vote
of a majority of the Trustees who are not parties to the Agreement or interested
persons of any such party on September 26, 1996. The Agreement is terminable
without penalty on 60-days' written notice by the Trustees, by vote of a
majority of the Fund's outstanding voting securities, or by Sunstone, and will
terminate automatically in the event of its assignment (as defined in the 1940
Act). For serving as distributor, and for providing certain distribution
services, Sunstone receives the fees described in the prospectus, plus
reimbursement of out-of-pocket expenses. The Distribution Agreement also
provides that Sunstone may provide similar services to others including other
investment companies.
As set forth in the Prospectus, the Trust has adopted a Service and
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. The
Plan authorizes payments by the Fund in connection with the distribution of its
shares at an annual rate, as determined from time to time by the Board of
Trustees, of up to 0.25% of the Fund's average daily net assets.
On September 26, 1996, the Board of Trustees of the Trust, 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 12b-1 Plan
or in any agreement related to the 12b-1 Plan (the "Rule 12b-1 Trustees"),
adopted the 12b-1 Plan for the Fund. The initial shareholder of the Fund
approved the 12b-1 Plan as of September 26 , 1996. The Plan was adopted in
anticipation that the Fund will benefit from the Plan through increased sales of
shares of the Fund, thereby reducing the Fund's expense ratio and providing an
asset size that allows the Adviser greater flexibility in management. The 12b-1
Plan provides that it shall continue in effect from year to year provided that a
majority of the Board of Trustees of the Trust, including a majority of the Rule
12b-1 Trustees, vote annually to continue the 12b-1 Plan. The Plan may be
terminated at any time by a vote of the Rule 12b-1 Trustees of the Fund or by a
vote of a majority of the outstanding shares. Any change in the Plan that would
materially increase the distribution expenses of the Fund provided for in the
Plan requires approval of the shareholders and the Board of Trustees, including
the Rule 12b-1 Trustees.
While the Plan is in effect, the selection and nomination of Trustees who
are not interested persons of the Trust will be committed to the discretion of
the Trustees of the Trust who are not interested persons of the Trust. The
Board of Trustees must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by the officers of the Trust. All
distribution fees paid by the Fund under the 12b-1 Plan will be paid in
accordance with Article III, Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as such Section may change
from time to time.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees, the Adviser is
primarily responsible for arranging the execution of the Fund's portfolio
transactions and the allocation of brokerage activities. In arranging such
transactions, the Adviser will seek to obtain best execution for the Fund,
taking into account such factors as price, size of order, difficulty of
execution, operational facilities of the firm involved, the firm's risk in
positioning a block of securities and research, market and statistical
information provided by such firm. While the Adviser generally seeks reasonable
competitive commission rates, the Fund will not necessarily always receive the
lowest commission available.
The Fund has no obligation to deal with any broker or group of brokers in
executing transactions in portfolio securities. Brokers who provide
supplemental research, market and statistical information to the Adviser may
receive orders for transactions by the Fund. The term "research, market and
statistical information" includes advice as to the value of securities, the
advisability of purchasing or selling securities, the availability of securities
or purchasers or sellers of securities, and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts. Information so received
will be in addition to and not in lieu of the services required to be performed
by the Adviser under the Investment Management Agreement and the expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information. Such information may be useful to the Adviser in
providing services to clients other than the Fund, and not all such information
may be used by the Adviser in connection with the Fund. Conversely, such
information provided to the Adviser by brokers and dealers through whom other
clients of the Adviser in the future may effect securities transactions may be
useful to the Adviser in providing services to the Fund. To the extent the
Adviser receives valuable research, market and statistical information from a
broker-dealer, the Adviser intends to direct orders for Fund transactions to
that broker-dealer, subject to the foregoing policies, regulatory constraints,
and the ability of that broker-dealer to provide competitive prices and
commission rates. In accordance with the rules of the National Association of
Securities Dealers, Inc., the Fund may also direct brokerage to broker-dealers
who facilitate sales of the Fund's shares, subject to also obtaining best
execution as described above from such broker-dealer.
A portion of the securities in which the Fund may invest are traded in the
over-the-counter markets, and the Fund intends to deal directly with the dealers
who make markets in the securities involved, except as limited by applicable law
and in certain circumstances where better prices and execution are available
elsewhere. Securities traded through market makers may include markups or
markdowns, which are generally not determinable. Under the 1940 Act, persons
affiliated with the Fund are prohibited from dealing with the Fund as principal
in the purchase and sale of securities except after application for and receipt
of an exemptive order from the Securities and Exchange Commission. The 1940 Act
restricts transactions involving the Fund and its "affiliates," including,
among others, the Trust's Trustees, officers, and employees and the Adviser, and
any affiliates of such affiliates. Affiliated persons of the Fund are permitted
to serve as its broker in over-the-counter transactions conducted on an agency
basis only.
Investment decisions for the Fund are made independently from those of
accounts advised by the Adviser or its affiliates. However, the same security
may be held in the portfolios of more than one account. When two or more
accounts advised by the Adviser simultaneously engage in the purchase or sale of
the same security, the prices and amounts will be equitably allocated among each
account. In some cases, this procedure may adversely affect the price or
quantity of the security available to a particular account. In other cases,
however, an account's ability to participate in large volume transactions may
produce better executions and prices.
TAXES
GENERAL
The Fund intends to qualify for treatment, and elect to be treated as a
regulated investment company ("RIC") under Subchapter M of the Code. In order
to do so, the Fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain and net gains from certain
foreign currency transactions) and must meet several additional requirements:
(1) the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies; (2) the
Fund must derive less than 30% of its gross income each taxable year from the
sale or other disposition of securities, or any of the following, that were held
for less than three months - options, futures or forward contracts (other than
those on foreign currencies), or foreign currencies (or options, futures or
forward contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect to
securities); (3) 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 (including receivables), U.S. government securities, securities of other
RICs, and other securities, with these other securities limited, with respect to
any one issuer, to an amount that does not exceed 5% of the value of the Fund's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (4) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (other than U.S. government securities or the securities
of other RICs) of any one issuer.
Dividends and other distributions declared by the Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
The Fund may invest in securities of foreign issuers, forward contracts and
options. These investments involve complex rules to determine the character and
timing of recognition of income received in connection therewith by the Fund.
Any gain or loss realized by the Fund upon the expiration or sale of
options held by it generally will be capital gain or loss. Expiration of a call
option written by the Fund will result in short-term capital gain. Any
security, option, or other position entered into or held by the Fund that
substantially diminishes its risk of loss from any other position held by the
Fund may constitute a "straddle" for federal income tax purposes. In general,
straddles are subject to certain rules that may affect the amount, character and
timing of the Fund's gains and losses with respect to straddle positions by
requiring, among other things, that the loss realized on disposition of one
position of a straddle be deferred until gain is realized on disposition of the
offsetting position; the Fund's holding period in certain straddle positions not
begin until the straddle is terminated (possibly resulting in the gain being
treated as short-term capital gain rather than long-term capital gain); and that
losses recognized with respect to certain straddle positions, which would
otherwise constitute short-term capital losses, be treated as long-term capital
losses. Different elections are available to the Fund that may mitigate the
effects of the straddle rules.
Certain options (including options on a broad-based index, such as the
Standard & Poor's 500 index) and forward contracts that are subject to Section
1256 of the Code ("Section 1256 Contracts") and that are held by the Fund at
the end of its taxable year generally will be required to be "marked to
market" for federal income tax purposes, that is, deemed to have been sold at
market value. Sixty percent of any net gain or loss recognized on these deemed
sales and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts will be treated as long-term capital gain or loss, and the
balance will be treated as short-term gain or loss.
Section 988 of the Code contains special tax rules applicable to certain
foreign currency transactions that may affect the amount, timing and character
of income, gain or loss recognized by the Fund. Under these rules, foreign
exchange gain or loss realized with respect to foreign currency-denominated debt
instruments, foreign currency forward contracts, foreign currency-denominated
payables and receivables and foreign currency options and futures contracts
(other than options and futures contracts that are governed by the mark-to-
market and 60/40 rules of Section 1256 of the Code and for which no election is
made) is treated as ordinary income or loss. Some part of the Fund's gain or
loss on the sale or other disposition of shares of a foreign corporation may,
because of changes in foreign currency exchange rates, be treated as ordinary
income or loss under Section 988 of the Code, rather than capital gain or loss.
A portion of the dividends from the Fund's investment company taxable
income (whether paid in cash or reinvested in additional Fund shares) may be
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by the Fund
from U.S. corporations. However, that portion of dividends received by a
corporate shareholder and deducted by it pursuant to the dividends-received
deduction is subject to the alternative minimum tax. In addition, availability
of the deduction is subject to certain holding period and debt-financing
limitations.
If shares of the Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares. All
or a portion of a loss realized upon the sale or redemption of shares of the
Fund may be disallowed to the extent shares of the Fund are purchased (including
shares acquired by means of reinvested dividends) within 30 days before or after
such redemption. Investors also should be aware that if shares are purchased
shortly before the record date for any distribution, the shareholder will pay
full price for the shares and receive some portion of the price back as a
taxable dividend or capital gain distribution.
The Fund will be subject to a nondeductible 4% excise tax on net income to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries that would reduce the
yield on the Fund's portfolio securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him or her, his or
her proportionate share of those taxes, (2) treat his or her share of those
taxes and of any dividend paid by the Fund that represents income from foreign
sources as his or her own income from those sources, and (3) either deduct the
taxes deemed paid by him or her in computing his taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against his or her federal income tax. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries if it
makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES
If the Fund acquires stock in certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as sources
that produce interest, dividends, rental, royalty or capital gain income) or
hold at least 50% of their assets in such passive sources ("passive foreign
investment companies"), the Fund could be subject to federal income tax and
additional interest charges on "excess distributions" received from such
companies or gains from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such tax. In some cases, elections may be available that would
ameliorate these adverse tax consequences, but such elections would require the
Fund to include certain amounts as income or gain (subject to the distribution
requirements described above) without a concurrent receipt of cash and could
result in the conversion of capital gain to ordinary income. The Fund may limit
its investments in passive foreign investment companies or dispose of such
investments if potential adverse tax consequences are deemed material in
particular situations. Because it is not always possible to identify a foreign
issuer as a passive foreign investment company in advance of making the
investment, the Fund may incur the tax in some instances.
NON-U.S. SHAREHOLDERS
Distributions of net investment income by the Fund to a shareholder who, as
to the United States, is a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership
("foreign shareholder") will be subject to U.S. withholding tax at a rate of 30%
(or lower treaty rate). Withholding will not apply if a dividend paid by the
Fund to a foreign shareholder is "effectively connected with the conduct of a
U.S. trade or business" and the foreign shareholder provides the Fund with the
certification required by the IRS to that effect, in which case the reporting
and withholding requirements applicable to domestic taxpayers will apply.
Distributions of net capital gain to a foreign shareholder generally are not
subject to withholding.
The foregoing is a general and abbreviated summary of certain U.S. federal
income tax considerations affecting the Fund and its shareholders and is based
on current provisions of the Code and applicable Treasury Regulations, which are
subject to change (possibly on a retroactive basis). Investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
The foregoing discussion and the related discussion in the Prospectus has
been prepared by the management of the Fund, and does not purport to be a
complete description of all tax implications of an investment in the Fund.
Heller, Ehrman, White & McAuliffe, legal counsel to the Fund, has expressed no
opinion in respect thereof. Shareholders should consult their own advisers
concerning the application of federal, state and local tax to their particular
situations.
DESCRIPTION OF SHARES
The Trust Agreement permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of one or more
separate series or classes representing interests in different investment
portfolios. The Trust may hereafter create series in addition to the Fund.
Under the terms of the Trust Agreement, each share of the Fund has a par value
of $0.01, represents a proportionate interest in the Fund with each other share
of its class and is entitled to such dividends and distributions out of the
income belonging to the Fund as are declared by the Trustees. Upon any
liquidation of the Fund, shareholders are entitled to share in the net assets of
the Fund available for distribution. Shares do not have any preemptive or
conversion rights. The right of redemption is described in the Prospectus.
Pursuant to the terms of the 1940 Act, the right of a shareholder to redeem
shares and the date of payment by the Fund may be suspended for more than seven
days (a) for any period during which the New York Stock Exchange is closed,
other than the customary weekends or holidays, or trading in the markets the
Fund normally utilizes is closed or is restricted as determined by the
Securities and Exchange Commission, (b) during any emergency, as determined by
the Securities and Exchange Commission, as a result of which it is not
reasonably practicable for the Fund to dispose of instruments owned by it or
fairly to determine the value of its net assets, or (c) for such other period as
the Securities and Exchange Commission may by order permit for the protection of
the shareholders of the Fund. The Trust may also suspend or postpone the
recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions. In addition, the Trust reserves the right to adopt, by
action of the Trustees, a policy pursuant to which it may, without shareholder
approval, redeem all of a shareholder's shares (a) if such shares have an
aggregate value below a designated amount, (b) to the extent that such
shareholder owns Shares equal to or in excess of a percentage of the outstanding
Shares determined from time to time by the Trustees; (c) to the extent that such
shareholder owns Shares equal to or in excess of a percentage, determined from
time to time by the Trustees, of the outstanding Shares of the Trust, or (d) if
the Trustees determine that it is not practical, efficient or advisable to
continue the operation of the Fund and that any applicable requirements of the
1940 Act have been met. Shares when issued as described in the Prospectus are
validly issued, fully paid and nonassessable.
In the event additional funds are created, the proceeds received by each
fund for each issue or sale of its shares, and all net investment income,
realized and unrealized gain and proceeds thereof, subject only to the rights of
creditors, will be specifically allocated to and constitute the underlying
assets of that fund. The underlying assets of each fund will be segregated on
the books of accounts, and will be charged with the liabilities in respect to
that fund and with a share of the general liabilities of the Trust. Expenses
with respect to the portfolios of the Trust will normally be allocated in
proportion to the net asset value of the respective portfolios except where
allocations of direct expenses can otherwise be fairly made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interest of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement, a
distribution plan subject to Rule 12b-1 under the 1940 Act or any change in a
fundamental investment policy would be effectively acted upon with respect to an
investment portfolio only if approved by a majority of the outstanding shares of
such investment portfolio. However, Rule 18f-2 also provides that the
ratification of the appointment of independent accountants, the approval of the
principal underwriting contracts and the election of Trustees may be effectively
acted upon by shareholders of the Trust voting together in the aggregate without
regard to a particular investment portfolio.
The term "majority of the outstanding shares" of either the Trust or a
particular fund or investment portfolio means the vote of the lesser of (i) 67%
or more of the shares of the Trust or such fund or portfolio present at a
meeting, if the holders of more than 50% of the outstanding shares of the Trust
or such fund or portfolio are present or represented by proxy, or (ii) more than
50% of the outstanding shares of the Trust or such fund or portfolio.
As a general matter, the Trust does not hold annual or other meetings of
shareholders. This is because the Trust Agreement provides for shareholders
voting only for the election or removal of one or more Trustees, if a meeting is
called for that purpose, and for certain other designated matters. Each Trustee
serves until the next meeting of shareholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the holders of two-thirds of the shares.
Under Delaware law, shareholders of the Trust are not generally personally
liable for obligations of the Trust. The Delaware Business Trust Act provides
that a shareholder of a Delaware business trust shall be entitled to the same
limitation of liability extended to shareholders of private for-profit
corporations. However, no similar statutory or other authority limiting
business trust shareholder liability exists in many states. As a result, to the
extent that a Delaware business trust or a shareholder is subject to the
jurisdiction of courts in such other states, the courts may not apply Delaware
law and may thereby subject the Trust's shareholders to liability. To guard
against this risk, the Trust Agreement (i) contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and will require that
notice of such disclaimer be given in each agreement, obligation and instrument
entered into or executed by the Trust or its Trustees and (ii) provides for
indemnification out of the property of the Trust of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a Trust
shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refused to apply Delaware law; (2) the
liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the Trust itself would be unable to meet its
obligations.
The Trust Agreement provides that each Trustee of the Trust will be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustees
("disabling conduct"), and for nothing else, and will not be liable for errors
of judgment or mistakes of fact or law. The Trust Agreement provides further
that the Trust will indemnify Trustees and officers of the Trust against
liabilities and expenses incurred in connection with litigation and other
proceedings in which they may be involved (or with which they may be threatened)
by reason of their positions with the Trust, except that no Trustee or officer
will be indemnified against any liability to the Trust or its shareholders to
which he would otherwise be subject by reason of disabling conduct.
The Trust Agreement provides that each shareholder, by virtue of becoming
such, will be held to have expressly assented and agreed to the terms of the
Trust Agreement and to have become a party thereto.
The Trust Agreement also contains procedures for the removal of Trustees by
its shareholders. At any meeting of shareholders, duly called and at which a
quorum is present, the shareholders may, by the affirmative vote of the holders
of two-thirds of the votes entitled to be cast thereon, remove any Trustee or
Trustees from office and may elect a successor or successors to fill any
resulting vacancies for unexpired terms of removed Trustees.
Upon the written request of the holders of shares entitled to not less than
ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Trust shall promptly call a special meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee. Whenever ten
or more shareholders of record who have been such for at least six months
preceding the date of application, and who hold in the aggregate either shares
having a net asset value of at least $25,000 or at least one percent (1%) of the
total outstanding shares, whichever is less, shall apply to the Trust's
Secretary in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to submit a request for a
meeting as described above and accompanied by a form of communication and
request which they wish to transmit, the Secretary shall within five business
days after such application either: (1) afford to such applicants access to a
list of the names and addresses of all shareholders as recorded on the books of
the Trust; or (2) inform such applicants as to the approximate number of
shareholders of record and the approximate cost of mailing to them the proposed
communication and form of request.
If the Secretary elects to follow the course specified in clause (2) of the
last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable promptness,
mail such material to all shareholders of record at their addresses as recorded
on the books unless within five business days after such tender the Secretary
shall mail to such applicants and file with the Securities and Exchange
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Board of Trustees to the effect
that in their opinion either such material contains untrue statements of fact or
omits to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
After opportunity for hearing upon the objections specified in the written
statement so filed, the Securities and Exchange Commission may, and if demanded
by the Board of Trustees or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them.
If the Securities and Exchange Commission shall enter an order refusing to
sustain any of such objections, or if, after the entry of an order sustaining
one or more of such objections, the Securities and Exchange Commission shall
find, after notice and opportunity for hearing, that all objections so sustained
have been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material of all shareholders with reasonable promptness after the
entry of such order and the renewal of such tender.
INDIVIDUAL RETIREMENT ACCOUNTS
Individuals who receive compensation or earned income, even if they are
active participants in a qualified retirement plan (or certain similar
retirement plans), may establish their own tax-sheltered Individual Retirement
Account ("IRA"). The Fund offers a prototype IRA plan which may be adopted by
individuals for rollovers from existing IRAs or retirement plans. Because of
the applicable $25,000 minimum purchase amount to establish an account with the
Fund, the Fund's prototype IRA may only be used to rollover proceeds from an
existing IRA or retirement plan. There is currently no charge for establishing
an IRA account, although there is an annual maintenance fee. Earnings on amounts
held in an IRA are not taxed until withdrawal.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as application forms, are available from
the transfer agent upon request at 1-800-871-2665. The IRA documents contain
a disclosure statement which the Internal Revenue Service requires to be
furnished to individuals who are considering adopting an IRA. Because a
retirement program involves commitments covering future years, it is important
that the investment objective of the Fund be consistent with the participant's
retirement objectives. Premature withdrawals from a retirement plan will result
in adverse tax consequences. Consultation with a competent financial and tax
adviser regarding the foregoing retirement plans is recommended.
PERFORMANCE INFORMATION
The Fund may from time to time advertise performance data such as "average
annual total return" and "total return." To facilitate the comparability of
historical performance data from one mutual fund to another, the SEC has
developed guidelines for the calculation of average annual total return.
The average annual total return for the Fund for a specific period is found
by first taking a hypothetical $1,000 investment ("initial investment") in the
Fund's shares on the first day of the period and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted from
the result, which is then expressed as a percentage. The calculation assumes
that all income and capital gains dividends paid by the Fund have been
reinvested at net asset value on the reinvestment dates during the period. This
calculation can be expressed as follows:
P(1 + T)N = ERV
Where: T = average annual total return.
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.
Total return performance for a specific period is calculated by first
taking an investment ("initial investment") in the Fund's shares on the first
day of the period and computing the "ending value" of that investment at the end
of the period. The total return percentage is then determined by subtracting
the initial investment from the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The calculation
assumes that all income and capital gains dividends paid by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Total return may also be shown as the increased dollar value of the investment
over the period or as a cumulative total return which represents the change in
value of an investment over a stated period and may be quoted as a percentage or
as a dollar amount.
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 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.
The Fund's performance figures will be based upon historical results and
will not necessarily be indicative of future performance. The Fund's returns
and net asset value will fluctuate and the net asset value of shares when sold
may be more or less than their original cost. Any additional fees charged by a
dealer or other financial services firm would reduce the returns described in
this section.
From time to time, in marketing and other 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 objective 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 performance of other
mutual funds by Morningstar, Inc., 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 3, 5, and 10
year periods. Rankings are not absolute or necessarily predictive of future
performance.
Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning the Fund, including reprints of or selections
from editorials or articles about the Fund. Sources for Fund performance and
articles about the Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News and World Report, the
Wall Street Journal, Barron's and a variety of investment newsletters.
The Fund may compare its performance to a wide variety of indices and
measures of inflation including the Standard & Poor's Index of 500 Stocks and
the NASDAQ Over-the-Counter Composite Index. There are differences and
similarities between the investments that the Fund may purchase for its
portfolios and the investments measured by these indices.
Occasionally statistics may be used to specify the Fund's volatility or
risk. Measures of volatility or risk are generally used to compare the Fund's
net asset value or performance relative to a market index. One measure of
volatility is beta. Beta is the volatility of a fund relative to the total
market as represented by the Standard & Poor's 500 Stock Index. A beta of more
than 1.00 indicates volatility greater than the market, and a beta of less than
1.00 indicates volatility less than the market. Another measure of volatility
or risk is standard deviation. Standard deviation is used to measure
variability of net asset value or total return around an average, over a
specified period of time. The premise is that greater volatility connotes
greater risk undertaken in achieving performance.
Marketing and other Trust literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other funds or broad categories of funds, such as money market, bond or equity
funds, in terms of potential risks and returns. Risk/return spectrums also may
depict funds that invest in both domestic and foreign securities or a
combination of bond and equity securities. Money market funds are designed to
maintain a constant $1.00 share price and have a fluctuating yield. Share
price, yield and total return of a bond fund will fluctuate. The share price
and return of an equity fund also will fluctuate. The description may also
compare a fund to bank products, such as certificates of deposit. Unlike mutual
funds, certificates of deposit are insured up to $100,000 by the U.S. government
and offer a fixed rate of return.
The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor, investment management techniques,
policies or investment suitability of the Fund, economic conditions, the effects
of inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements or communications to investors may summarize the substance of
information contained in shareholder reports (including the investment
composition of the Fund), as well as the views of the Adviser as to current
market, economic, trade and interest rate investment strategies and related
matters believed to be of relevance to the Fund. In addition, advertisements or
shareholder communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
communications may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail.
OTHER INFORMATION
As set forth in the Prospectus, the net asset value of the Fund will be
determined as of the close of trading on each day the New York Stock Exchange is
open for trading. The New York Stock Exchange is open for trading Monday
through Friday except New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday, the New
York Stock Exchange will not be open for trading on the preceding Friday, and
when any such holiday falls on a Sunday, the New York Stock Exchange will not be
open for trading on the following Monday unless unusual business conditions
exist, such as the ending of a monthly or the yearly accounting period.
Shares of the Fund may be exchanged for shares of the Northern Money Market
Fund as provided in the Prospectus. Sunstone Financial Group, Inc., the Fund's
administrator, distributor and transfer agent, receives a service fee from the
Northern Money Market Fund at the annual rate of 0.25 of 1% of the average daily
net asset value of the shares of the Fund exchanged into the Northern Money
Market Fund.
The Automatic Investing Plan permits an investor to use "Dollar Cost
Averaging" in making investments. Instead of trying to time market
performance, a fixed dollar amount is invested in shares of the Fund at
predetermined intervals. This may help investors reduce their average cost per
share because the agreed upon fixed investment amount allows more shares to be
purchased during periods of lower share prices and fewer shares during periods
of higher share prices. In order to be effective, Dollar Cost Averaging should
usually be followed on a sustained, consistent basis. Investors should be
aware, however, that shares bought using Dollar Cost Averaging are purchased
without regard to their price on the day of investment or to market trends.
Dollar Cost Averaging does not assure a profit and does not protect against
losses in a declining market. In addition, while investors may find Dollar Cost
Averaging to be beneficial, it will not prevent a loss if an investor ultimately
redeems his shares at a price which is lower than their purchase price. An
investor may want to consider his or her financial ability to continue purchases
through periods of low price levels.
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Trustees, make it undesirable for the Fund to pay for
redemptions in cash. In such cases the Board may authorize payment to be made
in portfolio securities of the Fund. However, the Fund has obligated itself
under the 1940 Act to redeem for cash all shares presented for redemption by any
one shareholder up to $250,000 (or 1% of the Fund's net assets if that is less)
in any 90-day period. Securities delivered in payment of redemptions are valued
at the same value assigned to them in computing the net asset value per share.
Shareholders receiving such securities generally will incur brokerage costs when
selling such securities.
Payment for shares of the Fund may, in the discretion of the Adviser, be
made in the form of securities that are permissible investments for the Fund as
described in the Prospectus. For further information about this form of
payment, contact the Transfer Agent. In connection with an in-kind securities
payment, the Fund will require, among other things, that the securities be
valued on the day of purchase in accordance with the pricing methods used by the
Fund and that the Fund receive satisfactory assurances that it will have good
and marketable title to the securities received by it; that the securities be in
proper form for transfer to the Fund; and that adequate information be provided
concerning certain tax matters relating to the securities. Payment for shares
of the Fund in the form of securities will generally be treated as a taxable
sale of such securities by the shareholder. In addition, so long as shares in
the Fund are offered or sold in Texas, any securities that are accepted as
payment for the shares of the Fund will be limited to securities that are issued
in transactions that involve a bona fide reorganization or statutory merger, or
will be limited to other acquisitions of portfolio securities that: (a) meet
the investment objective and policies of the Fund; (b) are acquired for
investment and not for resale; (c) are liquid securities that are not restricted
as to transfer either by law or liquidity of market; and (d) have a value that
is readily ascertainable (and not established only by valuation procedures) as
evidenced by a listing on the American Stock Exchange, New York Stock Exchange
or NASDAQ or as evidenced by their status as U.S. Government Securities, bank
certificates of deposit, banker's acceptances, corporate and other debt
securities that are actively traded, money market securities and other like
securities with a readily ascertainable value.
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act with respect to the
securities offered by the Fund's Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registration Statement including the
exhibits filed therewith may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
Statements contained in the Prospectus or in this Statement of Additional
Information as to the contents of any contract or other documents referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement of which the Prospectus and this Statement of Additional Information
form a part, each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
The following financial statement has been audited and is attached hereto:
1. Report of Independent Accountants.
2. Statement of Assets and Liabilities as of September 19, 1996.
3. Notes to Financial Statement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees of
The Purisima Funds
In our opinion, the acccompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of The
Purisima Total Return Fund (the "Fund") comprising The Purisima Funds at
September 19, 1996 in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the Fund'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 presentation. We believe that our audit
provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse
Price Waterhouse LLP
Milwaukee, Wisconsin
September 19, 1996
THE PURISIMA TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 19, 1996
ASSETS
Cash $100,000
Unamortized organization costs 50,275
Prepaid initial registration expenses 29,970
-------
Total Assets 180,245
-------
LIABILITIES
Accrued professional fees 39,000
Accounts payable 41,245
Payable to Adviser 0
-------
Total Liabilities 80,245
-------
NET ASSETS $100,000
=======
Capital shares, $0.01 par value;
Unlimited Authorization $100,000
=======
Shares outstanding 10,000
=======
Net asset value, redemption price and
offering price per share (net
assets/shares outstanding) $10.00
=====
The accompanying notes to financial statement are an integral part of this
statement.
THE PURISIMA TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENT
SEPTEMBER 19, 1996
(1) Organization
------------
The Purisima Total Return Fund (the "Fund") constituting the initial
series of The Purisima Funds (the "Trust") was organized on June 27, 1996
as a Delaware business trust and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company issuing its shares in series, each series representing a
distinct portfolio with its own investment objectives and policies. The
only series presently authorized is the Purisima Total Return Fund. The
Fund has had no operations other than those relating to organizational
matters, including the sale of 10,000 shares to capitalize the Fund, which
were sold to Fisher Investments, Inc. (the "Adviser") on September 11,
1996 for cash in the amount of $100,000.
(2) Significant Accounting Policies
-------------------------------
(a) Organization Costs
Costs incurred by the Fund in connection with its organization,
registration and the initial public offering of shares have been
deferred and will be amortized over the period of benefit, but not to
exceed five years from the date upon which the Fund commenced investment
activities. If any of the original shares of the Fund purchased by the
Adviser are redeemed by any holder thereof prior to the end of the
amortization period, the redemption proceeds will be reduced by the pro
rata share of the unamortized expenses as of the date of redemption.
The pro rata share by which the proceeds are reduced will be derived by
dividing the number of original shares of the Funds being redeemed by
the total number of original shares outstanding at the time of
redemption.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue
Code necessary to qualify as a regulated investment company and to make
the requisite distributions of income to its shareholders which will be
sufficient to relieve it from all or substantially all Federal income
taxes.
(3) Investment Adviser
-----------------
The Fund has an agreement with the Adviser to furnish investment advisory
services to the Fund. Under the terms of this agreement, the Fund will pay
the Adviser a monthly fee at the annual rate of 1.00% of the Fund's average
daily net assets. The Adviser has agreed to voluntarily reduce fees for
expenses (exclusive of brokerage, interest, taxes and extraordinary
expenses) that exceed the expense limitation of 1.50% of the Fund's average
daily net assets for the first fiscal year. The Investment Management
Agreement permits the Adviser to seek reimbursement of any reductions made
to its management fee and payments made to limit expenses which are the
responsibility of the Fund within the three-year period following such
reduction, subject to the Fund's ability to effect such reimbursement and
remain in compliance with applicable expense limitations. At such time as
it appears probable that the Advisor will seek 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.
(4) Service and Distribution Plan
-----------------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a Service
and Distribution Plan (the "Plan"). Under the Plan, the Fund is
authorized to pay expenses incurred for the purpose of financing activities
intended to result in the sale of shares of the Fund at an annual rate of up
to 0.25% of the Fund's average daily net assets.
APPENDIX A
Commercial Paper Ratings
- -------------------------
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The following summarizes the rating categories used by Standard &
Poor's for commercial paper in which the Fund may invest:
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper in which the Funds may invest:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
capacities: leading market positions in well-established industries; high rates
of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well-
established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
The three rating categories of Duff & Phelps for investment grade
commercial paper are "Duff 1," "Duff 2" and "Duff 3." Duff & Phelps
employs three designations, "Duff 1+," "Duff 1" and "Duff 1-," within the
highest rating category. The following summarizes the rating categories used by
Duff & Phelps for commercial paper in which the Fund may invest:
"Duff 1+" - Debt possesses highest certainty of timely payment. Short-
term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"Duff 1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"Duff 2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding need may
enlarge total financing requirements, access to capital markets is good.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The highest rating
category of Fitch for short-term obligations is "F-1." Fitch employs two
designations, "F-1+" and "F-1," within the highest category. The following
summarizes the rating categories used by Fitch for short-term obligations in
which the Funds may invest:
"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
Fitch may also use the symbol "LOC" with its short-term ratings to indicate
that the rating is based upon a letter of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
or incomplete payment of principal or interest of unsubordinated instruments
having a maturity of one year or less which are issued by a bank holding company
or an entity within the holding company structure. The following summarizes the
ratings used by Thomson BankWatch in which the Fund may invest:
"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - this designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings in which the Fund may
invest:
"A1" - Obligations are supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit feature, a rating
of A1+ is assigned.
"A2" - Obligations are supported by a good capacity for timely repayment.
Corporate Long-Term Investment Grade Debt Ratings
- -------------------------------------------------
STANDARD & POOR'S INVESTMENT GRADE DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees. The debt rating is not a recommendation to
purchase, sell, or hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in accordance
with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
MOODY'S LONG-TERM INVESTMENT GRADE DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature of taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated 'AAA.' Because bonds rated
in the 'AAA' and 'AA' categories are not significantly vulnerable to foreseeable
future developments, short-term debt of the issuers is generally rated 'F-1+.'
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.
DUFF & PHELPS, INC. LONG-TERM INVESTMENT GRADE DEBT RATINGS
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected viability of the obligor at the trough of the cycle is a critical
determination.
Each rating also takes into account the legal form of the security (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection. Review of indenture restrictions is important to
the analysis of a company's operating and financial constraints.
The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities.
RATING SCALE DEFINITION
- ------------ ----------
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk
AA is modest, but may vary slightly from time to time because
AA- of economic conditions.
A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic
A- areas.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
A. FINANCIAL STATEMENTS (ALL INCLUDED IN PART B)*:
Report of Independent Accountants.
Statement of Assets and Liabilities as of September 19, 1996.
Notes to Financial Statement.
B. EXHIBITS
1.1 Certificate of Trust (incorporated by reference to Exhibit 1.1
to the Registrant's Registration Statement on Form N-1A).
1.2 Registrant's Agreement and Declaration of Trust (incorporated
by reference to Exhibit 1.2 to the Registrant's Registration
Statement on Form N-1A).
2. Registrant's By-Laws (incorporated by reference to Exhibit 2
to the Registrant's Registration Statement on Form N-1A).
3. None.
4. None.
5. Investment Management Agreement by and between Registrant on
behalf of the Fund and Fisher Investments, Inc.
6. Distribution Agreement by and between Registrant and Sunstone
Financial Group, Inc.
7. None.
8. Custodian Agreement by and between Registrant and UMB Bank,
N.A.
9.1 Administration and Fund Accounting Agreement by and between
Registrant and Sunstone Financial Group, Inc.
9.2 Transfer Agency Agreement by and between Registrant and
Sunstone Financial Group, Inc.
10. Legal Opinion of Heller Ehrman White & McAuliffe, counsel for
Registrant (incorporated by reference to Exhibit 10 to the
Registrant's Registration Statement on Form N-1A).
11. Consent of Independent Accountants.
12. None.
13.1 Subscription Agreement.
13.2 Organizational Expense Agreement.
14. Form of Individual Retirement Custodial Account Agreement and
Disclosure Statement.
15. Registrant's Service and Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940.
16. Computation of Performance Figures (incorporated by reference
to Exhibit 16 to the Registrant's Registration Statement on
Form N-1A).
17. Financial Data Schedule.
18. None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-------------------------------------------------------------
Registrant neither controls any person nor is under common control with any
other person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
-------------------------------
Number of Record
Title of Class Holders as of September 18, 1996
-------------- --------------------------------
Purisima Total Return Fund 1
$0.01 Par Value
ITEM 27. INDEMNIFICATION.
---------------
Registrant's Board of Trustees has adopted the following By-law provisions
which are in full force and effect and have not been modified or cancelled:
ARTICLE VI
INDEMNIFICATION OF TRUSTEES OFFICERS
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee
or other agent of the Trust or is or was serving at the request of the Trust as
a Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation that was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes, without limitation, attorney's fees and any expenses
of establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Trust) by reason of
the fact that such person is or was an agent of the Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed: (a) in the case of conduct in his or her
official capacity as a Trustee of the Trust, that his or her conduct was in the
Trust's best interests, and (b) in all other cases, that his or her conduct was
at least not opposed to the Trust's best interests, and (c) in the case of a
criminal proceeding that he or she had no reasonable cause to believe the
conduct of that person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner which the person reasonably believed to be in the
best interest of the Trust or that the person had reasonable cause to believe
that the person's conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. The Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that such person is or was an agent of the Trust,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable on the basis that personal benefit was
improperly received by him or her, whether or not the benefit resulted
from an action taken in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's duty
to the Trust, unless and only to the extent that the court in which that
action was brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by reason of
the disabling conduct set forth in the preceding paragraph and is fairly
and reasonably entitled to indemnity for the expenses which the court
shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses incurred
in defending a threatened or pending action that is settled or otherwise
disposed of without court approval, unless the required approval set
forth in Section 6 of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of the
Trust has been successful on the merits in defense of any proceeding referred to
in Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party Trustees, also determines
that, based upon a review of the facts, the agent was not liable by reason of
the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) a majority vote of a quorum consisting of Trustees who are not parties to
the proceeding and are not interested persons of the Trust (as defined in
the Investment Company Act of 1940); or
(b) a written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts, that there is reason to believe that the
agent ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must conform to the standards set
forth in Section 6 of this Article for determining that the indemnification is
permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of the Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) that it would be inconsistent with a provision of the Trust's Agreement
and Declaration of Trust, a resolution of the shareholders of the Trust,
or an agreement in effect at the time of accrual of the alleged cause of
action asserted in the proceeding in which the expenses were incurred or
other amounts were paid which prohibits or otherwise limits
indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of the Trust to purchase such insurance, the Trust shall
purchase and maintain insurance on behalf of any agent of the Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that the Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Trust's Agreement and Declaration of Trust.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article VI does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the Trust as defined in Section 1 of
this Article VI. Nothing contained in this Article VI shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article VI.
Insofar as indemnification for liability rising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of
Registrant to the foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being registered,
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
issue.
Section 11 of the Investment Management Agreement between the Registrant
and the Adviser provides for indemnification of the Adviser in connection with
certain claims and liabilities to which the Adviser, in its capacity as the
Registrant's investment adviser, may be subject. A copy of the Investment
Management Agreement is incorporated by reference as Exhibit 5.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
----------------------------------------------------
Fisher Investments, Inc., Registrant's investment adviser, provides investment
advisory services for large corporations, pension plans, endowments,
foundations, governmental agencies and individuals. Set forth below is
additional biograhpical information and a description of any company with which
the officers and directors of Fisher Investments, Inc. have been engaged at any
time since June 1, 1994 in the capacity of director, officer, employee, partner
or trustee:
Kenneth L. Fisher is the Chief Executive Officer of Fisher Investments, Inc. and
Chairman of its Investment Policy Committee. Mr. Fisher makes investment policy
and tactical investment decisions. Since July 1984, Mr. Fisher has written a
monthly column for Forbes magazine. Mr. Fisher has operated the Adviser
(including its predecessor) since 1979.
Jeffrey L. Silk is the Director of Operations, Senior Vice President and member
of the Investment Policy Committee of Fisher Investments, Inc. He is
responsible for overseeing the day to day activities of the trading and
operations group as well as development of statistical databases used for
screening equity and fixed income securities. He has been employed by the
Adviser since 1983.
Sherrilyn A. Fisher is Senior Vice President and Corporate Secretary of the
Adviser. Her chief responsibilities are the overview of all activities
involving maintenance of the office and its facilities. Ms. Fisher has been
employed by the Adviser since 1984.
ITEM 29. PRINCIPAL UNDERWRITERS.
----------------------
(a) Sunstone Financial Group, Inc. currently serves as distributor of the
shares of The Northern Funds, The Haven Capital Management Trust, First Omaha
Funds, Inc. and Van Wagoner Funds, Inc.
(b) To the best of Registrant's knowledge, the executive officers of
Sunstone Financial Group, Inc., distributor for Registrant, are as follows:
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS SUNSTONE FINANCIAL GROUP, INC. WITH REGISTRANT
- ------------------ ------------------------------ ---------------------
Miriam M. Allison President and Director None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Daniel S. Allison Secretary and Director None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Mary M. Tenwinkel Senior Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Theresa A. Ladwig Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Randy M. Pavlick Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Anita M. Zagrodnik Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Fayez Akhras Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
--------------------------------
All accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are in the possession of the Registrant, at Registrant's corporate offices,
except (1) records held and maintained by relating to its functions as custodian
and (2) records held and maintained by Sunstone Financial Group, Inc., 207 East
Buffalo Street, Suite 400, Milwaukee, Wisconsin, 53202, relating to its
functions as administrator, fund accountant and transfer agent.
ITEM 31. MANAGEMENT SERVICES.
-------------------
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
ITEM 32. UNDERTAKINGS.
------------
(a) Registrant undertakes to provide its Annual Report upon request
without charge to any recipient of a Prospectus.
(b) Registrant undertakes to file a post-effective amendment to this
Registration Statement within four to six months of the effective date of this
Registration Statement which will contain financial statements (which need not
be certified) as of and for the time period reasonably close or as soon as
practicable to the date of such amendment.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it has duly
caused this Amendment to the Registration Statement on Form N-1A to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Woodside, State of California, on the 19th day of September, 1996.
THE PURISIMA FUNDS
(Registrant)
By: /s/ Kenneth L. Fisher
---------------------
Kenneth L. Fisher
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement on Form N-1A has been signed below by the
following person in the capacities and on the date indicated.
Name Title Date
- ---- ----- ----
/s/ Kenneth L. Fisher President; Trustee (principal September 19, 1996
----------------- executive officer; principal
Kenneth L. Fisher financial and accounting officer)
EXHIBIT INDEX
1.1 Certificate of Trust (incorporated by reference to Exhibit 1.1
to the Registrant's Registration Statement on Form N-1A).
1.2 Registrant's Agreement and Declaration of Trust (incorporated
by reference to Exhibit 1.2 to the Registrant's Registration
Statement on Form N-1A).
2. Registrant's By-Laws (incorporated by reference to Exhibit 2
to the Registrant's Registration Statement on Form N-1A).
3. None.
4. None.
5. Investment Management Agreement by and between Registrant on
behalf of the Fund and Fisher Investments, Inc.
6. Distribution Agreement by and between Registrant and Sunstone
Financial Group, Inc.
7. None.
8. Custodian Agreement by and between Registrant and UMB Bank,
N.A.
9.1 Administration and Fund Accounting Agreement by and between
Registrant and Sunstone Financial Group, Inc.
9.2 Transfer Agency Agreement by and between Registrant and
Sunstone Financial Group, Inc.
10. Legal Opinion of Heller Ehrman White & McAuliffe, counsel for
Registrant (incorporated by reference to Exhibit 10 to the
Registrant's Registration Statement on Form N-1A).
11. Consent of Independent Accountants.
12. None.
13.1 Subscription Agreement.
13.2 Organizational Expense Agreement.
14. Form of Individual Retirement Custodial Account Agreement and
Disclosure Statement.
15. Registrant's Service and Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940.
16. Computation of Performance Figures (incorporated by reference
to Exhibit 16 to the Registrant's Registration Statement on
Form N-1A).
17. Financial Data Schedule.
18. None.
<.R>
EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the ___th day of October,
1996, by and between THE PURISIMA FUNDS, a Delaware business trust (hereinafter
called the "Trust"), on behalf of each series of the Trust listed in APPENDIX A
hereto, as such may be amended from time to time (each series hereinafter
referred to individually as a "Fund" and collectively as the "Funds") and FISHER
INVESTMENTS, INC., a California corporation (hereinafter called the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice and investment management services, as an
independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render advice and
services to the Funds pursuant to the terms and provisions of this Agreement,
and the Manager is interested in furnishing said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF MANAGER. The Trust hereby employs the Manager,
and the Manager hereby accepts such employment, to render investment advice and
management services with respect to the assets of the Funds for the period and
on the terms set forth in this Agreement, subject to the supervision and
direction of the Trust's Board of Trustees.
2. DUTIES OF MANAGER.
(a) GENERAL DUTIES. The Manager shall act as investment manager
to the Funds and shall supervise investments of the Funds on behalf of the Funds
in accordance with the investment objectives, programs and restrictions of the
Funds as provided in the Trust's governing documents, including, without
limitation, the Trust's Agreement and Declaration of Trust and By-Laws, or
otherwise and such other limitations as the Trustees may impose from time to
time in writing to the Manager. Without limiting the generality of the
foregoing, the Manager shall: (i) furnish the Funds with advice and
recommendations with respect to the investment of each Fund's assets and the
purchase and sale of portfolio securities for the Funds, including the taking of
such other steps as may be necessary to implement such advice and
recommendations; (ii) furnish the Funds with reports, statements and other data
on securities, economic conditions and other pertinent subjects which the
Trust's Board of Trustees may reasonably request; (iii) manage the investments
of the Funds, subject to the ultimate supervision and direction of the Trust's
Board of Trustees; (iv) provide persons satisfactory to the Trust's Board of
Trustees to act as officers and employees of the Trust and the Funds (such
officers and employees, as well as certain Trustees, may be trustees, directors,
officers, partners, or employees of the Manager or its affiliates), but not
including personnel to provide administrative services to the Funds; and (v)
render to the Trust's Board of Trustees such periodic and special reports with
respect to each Fund's investment activities as the Board may reasonably
request.
(b) BROKERAGE. The Manager shall place orders for the purchase
and sale of securities either directly with the issuer or with a broker or
dealer selected by the Manager. In placing each Fund's securities trades, it is
recognized that the Manager will give primary consideration to securing the most
favorable price and efficient execution, in a reasonable effort to ensure that
each Fund's total cost or proceeds in each transaction will be the most
favorable under all the circumstances. Within the framework of this policy, the
Manager may consider the financial responsibility, research and investment
information, and other services provided by brokers or dealers who may effect or
be a party to any such transaction or other transactions to which other clients
of the Manager may be a party.
It is also understood that it is desirable for the Funds that the
Manager have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide such research and analysis, subject to review by
the Trust's Board of Trustees from time to time. It is understood by both
parties that the Manager may select broker-dealers for the execution of the
Funds' portfolio transactions who provide research and analysis which the
Manager may lawfully and appropriately use in its investment management and
advisory capacities, whether or not such research and analysis may also be
useful to the Manager in connection with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of one or more of the Funds as well as of other
clients, the Manager, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Manager in the manner it considers to be the most equitable under the
circumstances and consistent with its fiduciary obligations to the Funds and to
such other clients.
3. BEST EFFORTS AND JUDGMENT. The Manager shall use its best
judgment and efforts in rendering the advice and services to the Funds as
contemplated by this Agreement.
4. INDEPENDENT CONTRACTOR. The Manager shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for or
represent the Trust or the Funds in any way, or in any way be deemed an agent
for the Trust or for the Funds. It is expressly understood and agreed that the
services to be rendered by the Manager to the Funds under the provisions of this
Agreement are not to be deemed exclusive, and the Manager shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be materially impaired
thereby.
5. MANAGER'S PERSONNEL. The Manager shall, at its own expense,
maintain such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Manager or the Trust's Board of Trustees may desire and reasonably request.
6. REPORTS BY FUNDS TO MANAGER. Each Fund will from time to time
furnish to the Manager detailed statements of its investments and assets, and
information as to its investment objective or objectives and needs, and will
make available to the Manager such financial reports, proxy statements, legal
and other information relating to its investments as may be in its possession or
available to it, together with such other information as the Manager may
reasonably request.
7. EXPENSES.
(a) With respect to the operation of each Fund, the Manager is
responsible for (i) the compensation of any of the Trust's Trustees, officers,
and employees who are affiliates of the Manager (but not the compensation of
employees performing services in connection with expenses which are the Fund's
responsibility under Subparagraph 7(b) below) and (ii) providing office space
and equipment reasonably necessary for the operation of the Funds.
(b) Each Fund is responsible for and has assumed the obligation
for payment of all of its expenses, other than as stated in Subparagraph 7(a)
above, including but not limited to: fees and expenses incurred in connection
with the issuance, registration and transfer of its shares; brokerage and
commission expenses; all expenses of transfer, receipt, safekeeping, servicing
and accounting for the cash, securities and other property of the Trust for the
benefit of the Funds including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account required under the 1940 Act;
taxes, if any; expenditures in connection with meetings of each Fund's
Shareholders and the Trust's Board of Trustees that are properly payable by the
Fund; salaries and expenses of officers and fees and expenses of members of the
Trust's Board of Trustees or members of any advisory board or committee who are
not members of, affiliated with or interested persons of the Manager; insurance
premiums on property or personnel of each Fund which inure to its benefit,
including liability and fidelity bond insurance; the cost of preparing and
printing reports, proxy statements, prospectuses and statements of additional
information of the Fund or other communications for distribution to existing
shareholders; legal, auditing and accounting fees; trade association dues; fees
and expenses (including legal fees) of registering and maintaining registration
of its shares for sale under federal and applicable state and foreign securities
laws; all expenses of maintaining and servicing shareholder accounts, including
all charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of the Funds (including, without
limitation, fund accounting and administration agents), if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as herein otherwise prescribed.
(c) To the extent the Manager incurs any costs by assuming
expenses which are an obligation of a Fund as set forth herein, such Fund shall
promptly reimburse the Manager for such costs and expenses, except to the extent
the Manager has otherwise agreed to bear such expenses. To the extent the
services for which a Fund is obligated to pay are performed by the Manager, the
Manager shall be entitled to recover from such Fund to the extent of the
Manager's actual costs for providing such services.
8. INVESTMENT ADVISORY AND MANAGEMENT FEE.
(a) Each Fund shall pay to the Manager, and the Manager agrees
to accept, as full compensation for all investment management and advisory
services furnished or provided to such Fund pursuant to this Agreement, a
management fee as set forth in the Fee Schedule attached hereto as APPENDIX B,
as may be amended in writing from time to time by the Trust and the Manager.
(b) The management fee shall be accrued daily by each Fund and
paid to the Manager monthly.
(c) The initial fee under this Agreement shall be payable
monthly following the effective date of this Agreement and shall be prorated as
set forth below. If this Agreement is terminated prior to the end of any month,
the fee to the Manager shall be prorated for the portion of any month in which
this Agreement is in effect which is not a complete month according to the
proportion which the number of calendar days in the month during which the
Agreement is in effect bears to the number of calendar days in the month, and
shall be payable within ten (10) days after the date of termination.
(d) The fees payable to the Manager under this Agreement will be
reduced to the extent required under the most stringent expense limitation
applicable to a Fund imposed by any state in which shares of the Funds are
registered or qualified for sale. The Manager voluntarily may reduce any portion
of the compensation or reimbursement of expenses due to it pursuant to this
Agreement and may agree to make payments to limit the expenses which are the
responsibility of a Fund under this Agreement. Any such reduction or payment
shall be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement due
to the Manager hereunder or to continue future payments. Any such reduction
will be agreed upon prior to accrual of the related expense or fee and will be
estimated daily. Any fee withheld or voluntarily reduced and Fund expense paid
by the Manager voluntarily or pursuant to an agreed upon expense cap shall
be reimbursed by the appropriate Fund to the Manager in the first, second
or third (or any combination thereof) fiscal year next succeeding the fiscal
year of the withholding, reduction or payment to the extent permitted by
applicable law if the aggregate expenses for the next succeeding fiscal year,
second succeeding fiscal year or third succeeding fiscal year do not exceed
the applicable state limitation or any more restrictive limitation to which the
Manager has agreed. Such reimbursement may be paid prior to the Fund's
payment of current expenses if so requested by the Manager even if such
payment may require the Manager to waive, reduce or pay current Fund
expenses.
(e) The Manager may agree not to require payment of any portion
of the compensation or reimbursement of expenses otherwise due to it pursuant to
this Agreement prior to the time such compensation or reimbursement has accrued
as a liability of the Fund. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Manager hereunder.
9. FUND SHARE ACTIVITIES OF MANAGER'S OFFICERS AND EMPLOYEES. The
Manager agrees that neither it nor any of its officers or employees shall take
any short position in the shares of the Funds. This prohibition shall not
prevent the purchase of such shares by any of the officers or bona fide
employees of the Manager or any trust, pension, profit-sharing or other benefit
plan for such persons or affiliates thereof, at a price not less than the net
asset value thereof at the time of purchase, as allowed pursuant to rules
promulgated under the 1940 Act.
10. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust, By-
Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and Funds.
11. MANAGER'S LIABILITIES.
(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the Trust
or the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security or other
asset or instrument by the Funds.
(b) The Funds shall indemnify and hold harmless the Manager and
the shareholders, directors, officers and employees of the Manager (any such
person, an "Indemnified Party") against any loss, liability, claim, damage or
expense (including the reasonable cost of investigating and defending any
alleged loss, liability, claim, damage or expense and reasonable legal fees
incurred in connection therewith) arising out of the Indemnified Party's
performance or non-performance of any duties under this Agreement, provided,
however, that nothing herein shall be deemed to protect any Indemnified Party
against any liability to which such Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties hereunder or by reason of reckless disregard of its
obligations and duties under this Agreement.
(c) No provision of this Agreement shall be construed to protect
any Trustee or officer of the Trust, or officer of the Manager, from liability
in violation of Sections 17(h) and (i) of the 1940 Act.
12. NON-EXCLUSIVITY. The Trust's employment of the Manager is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein. In
the event this Agreement is terminated with respect to any Fund, this Agreement
shall remain in full force and effect with respect to any and all other Funds
listed on APPENDIX A hereto, as the same may be amended.
13. TERM. This Agreement shall become effective at the time the
Trust's initial Registration Statement under the Securities Act of 1933 with
respect to the shares of the Trust is declared effective by the Securities and
Exchange Commission and shall remain in effect for a period of two (2) years,
unless sooner terminated as hereinafter provided. This Agreement shall continue
in effect as to each Fund after such initial two-year period for additional
periods not exceeding one (l) year so long as such continuation is approved with
respect to such Fund at least annually by (i) the Board of Trustees of the Trust
or by the vote of a majority of the outstanding voting securities of such Fund
and (ii) the vote of a majority of the Trustees of the Trust who are not parties
to this Agreement nor interested persons thereof, cast in person at a meeting
called for the purpose of voting on such approval.
14. TERMINATION. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds, without payment of any penalty, by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of a Fund, upon sixty (60) days' prior written notice to the
Manager, and by the Manager upon sixty (60) days' prior written notice to a
Fund.
15. TERMINATION BY ASSIGNMENT. This Agreement shall terminate
automatically in the event of any transfer or assignment thereof, as defined in
the 1940 Act.
16. TRANSFER, ASSIGNMENT. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged without the affirmative
vote or written consent of the holders of a majority of the outstanding voting
securities of each Fund.
17. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected thereby.
18. DEFINITIONS. The terms "majority of the outstanding voting
securities" and "interested persons" shall have the meanings as set forth in the
1940 Act.
19. NOTICE OF DECLARATION OF TRUST. The Manager agrees that the
Trust's obligations under this Agreement shall be limited to the Funds and to
their respective assets, and that the Manager shall not seek satisfaction of any
such obligation from the shareholders of the Funds nor from any Trustee,
officer, employee or agent of the Trust or the Funds.
20. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
21. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without giving
effect to the conflict of laws principles thereof; provided that nothing herein
shall be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the 1940 Act and the Investment Advisors Act of
1940 and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested by their duly authorized officers, all on the day
and year first above written.
THE PURISIMA FUNDS FISHER INVESTMENTS, INC.
By: By:
- -------------------------------- ---------------------------
Title: Title:
THE PURISIMA FUNDS
APPENDIX A
to the Investment Management Agreement
The provisions of the Investment Management Agreement between the Trust and the
Manager apply to the following series of the Trust:
1. The Purisima Total Return Portfolio Fund
Date: July _______, 1996.
THE PURISIMA FUNDS
APPENDIX B
to the Investment Management Agreement
Each Fund shall pay to the Manager, as full compensation for all investment
management and advisory services furnished or provided to such Fund pursuant to
the Investment Management Agreement, a management fee based upon each Fund's
average daily net assets at the following per annum rates:
1. The Purisima Total Return Fund 1.00 %
EXHIBIT 6
DISTRIBUTION AGREEMENT
----------------------
THIS AGREEMENT is made as of this ___ day of October, 1996, by and between
The Purisima Funds, a Delaware business trust (the "Trust") and Sunstone
Financial Group, Inc., a Wisconsin Corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and is authorized
to issue shares of beneficial ownership (the "Shares") in separate series with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and with all states
necessary in order for the Distributor to legally perform its obligations
hereunder, and the Distributor is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Distributor desire to enter into an agreement
pursuant to which Distributor shall be the distributor of the Shares of the
Trust representing the investment portfolios listed on Schedule A hereto and any
additional investment portfolios the Trust and Distributor may agree upon and
include on Schedule A as such Schedule may be amended from time to time (such
investment portfolios and any additional investment portfolios are individually
referred to as a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR.
The Trust hereby appoints the Distributor as agent for the distribution
of the Shares, on the terms and for the period set forth in this Agreement.
Distributor hereby accepts such appointment as agent for the distribution of the
Shares on the terms and for the period set forth in this Agreement.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
2.1 Distributor will act as agent for the distribution of Shares in
accordance with the instructions of the Trust's Board of Trustees and the
registration statement and prospectuses then in effect with respect to the Funds
under the Securities Act of 1933, as amended (the "1933 Act").
2.2 Subject to the terms of Section 4.2, Distributor may finance
appropriate activities which it deems reasonable which are primarily intended to
result in the sale of Shares. Distributor may enter into servicing and/or
selling agreements with qualified broker/dealers and other persons with respect
to the offering of Shares to the public, and if it so chooses Distributor will
act only on its own behalf as principal. The Distributor shall not be obligated
to sell any certain number of Shares of any Fund.
2.3 All Shares of the Funds offered for sale by Distributor shall be
offered for sale to the public at a price per unit (the "offering price") equal
to their net asset value (determined in the manner set forth in the Funds' then
current prospectus).
2.4 Distributor shall act as distributor of the Shares in compliance with
all applicable laws, rules and regulations, including, without limitation, all
rules and regulations made or adopted pursuant to the 1940 Act, by the
Securities and Exchange Commission (the "Commission") and the NASD. Distributor
shall provide to the Trust's Board of Trustees, at least quarterly, a report of
its expenses incurred pursuant to this Agreement.
3. DUTIES AND REPRESENTATIONS OF THE TRUST.
3.1 The Trust represents that it is registered as an open-end management
investment company under the 1940 Act and that it has and will continue to act
in conformity with its Certificate of Trust, Agreement and Declaration of Trust,
By-Laws and its registration statement, as each may be amended from time to
time, and resolutions and other instructions of its Board of Trustees and has
and will continue to comply in all material respects with all applicable laws,
rules and regulations including without limitation the 1933 Act, the 1934 Act,
the 1940 Act, the laws of the states in which shares of the Funds are offered
and sold, and the rules and regulations thereunder.
3.2 The Trust or its agent shall take all necessary action to register and
maintain the registration of the Shares under the 1933 Act for sale as herein
contemplated and the Trust shall pay all costs and expenses in connection with
the registration of Shares under the 1933 Act, and be responsible for all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Trust hereunder.
3.3 The Trust shall execute any and all documents and furnish any and all
information and otherwise take all actions which may be reasonably necessary in
connection with the qualification of the Shares for sale in such states as
Distributor and the Trust may approve, and the Trust or its agent upon
instructions from the Trust shall maintain the registration of a sufficient
number or amount of shares thereunder, and the Trust shall pay all expenses
which may be incurred in connection with such qualification.
3.4 The Trust shall furnish Distributor from time to time with such
information with respect to the Trust and the Shares as Distributor may
reasonably request, and the Trust warrants that the statements contained in any
such information shall be true and correct in all material respects. The Trust
also shall furnish Distributor upon request with: (a) annual audited reports of
books and accounts with respect to each of the Funds, audited by independent
public accountants regularly retained by the Trust, (b) semi-annual reports with
respect to each of the Funds, and (c) from time to time such additional
information regarding the Trust's financial condition as Distributor may
reasonably request.
3.5 The Trust represents to Distributor that all registration statements
and prospectuses of the Trust filed or to be filed with the Commission under the
1933 Act with respect to the Shares have been and will be prepared in conformity
in all material respects with the applicable requirements of the 1933 Act, the
1940 Act and the rules and regulations of the Commission thereunder. As used in
this Agreement the terms "registration statement" and "prospectus" shall mean
any registration statement and prospectus (together with the related statement
of additional information) at any time now or hereafter filed with the
Commission with respect to any of the Shares and any amendments and supplements
thereto which at any time shall have been or will be filed with said Commission.
The Trust represents and warrants to Distributor that any registration statement
and prospectus, when such registration statement becomes effective, will contain
all statements required to be stated therein in conformity in all material
respects with the 1933 Act, the 1940 Act and the rules and regulations of the
Commission; that all information contained in the registration statement and
prospectus will be true and correct in all material respects when such
registration statement becomes effective; and that neither the registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Trust agrees to file from time to time such amendments,
supplements, reports and other documents as may be necessary in order to comply
with the 1933 Act and the 1940 Act in all material respects and in order that
there may be no untrue statement of a material fact in a registration statement
or prospectus, or necessary in order that there may be no omission to state a
material fact in the registration statement or prospectus which omission would
make the statements therein misleading. If the Trust shall not propose an
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Trust of a written good faith and reasonable request from
Distributor to do so, Distributor may, at its option, immediately terminate this
Agreement. The Trust shall not file any amendment to the registration statement
or supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
3.6 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, the Trust's
officers may decline to accept any orders for, or make any sales of, any Shares
until such time as they deem it advisable to accept such orders and to make such
sales and the Trust shall advise Distributor promptly of such determination.
3.7 The Trust agrees to advise the Distributor promptly in writing:
(i) of any request by the Commission for amendments to the
registration statement or prospectuses;
(ii) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or prospectuses then
in effect or the initiation of any proceeding for that purpose;
(iii) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectuses or which
requires the making of a change in such registration statement or prospectuses
in order to make the statements therein not materially misleading; and
(iv) of all actions taken by the Commission with respect to any
amendments to any registration statement or prospectus which may from time to
time be filed with the Commission.
4. COMPENSATION.
4.1 Subject to the limitations contained in Section 4.3 below, (i) for
serving as distributor the Funds will pay to the Distributor a fee, payable
monthly in arrears, based on the Fund's aggregate average net assets, at the
annual rate of 0.20 of 1.0% of each Fund's first $50,000,000 of average daily
net assets, 0.10 of 1.0% on each Fund's next $50,000,000 of average daily net
assets, and 0.05 of 1.0% of each Fund's average daily net assets in excess of
$100,000,000; provided, however, that such compensation shall be subject to an
aggregate minimum annual fee of $50,000, and (ii) for marketing, advertising and
call management services, the Funds will pay to the Distributor such fees as may
be agreed to by the Funds and Distributor.
4.2 In addition to the compensation payable pursuant to Section 4.1, the
Funds will reimburse the Distributor or pay directly, at the Distributor's
discretion, the Distributor's (i) out-of-pocket expenses incurred in connection
with activities primarily intended to result in the sale of Shares including,
without limitation, typesetting, printing and distribution of prospectuses and
shareholder reports, production, printing and distribution of sales materials
and forms, placement of media advertising, engagement of designers, free lance
writers and public relation firms, long distance telephone lines, services and
charges, postage, overnight delivery charges, storage of inventory, regulatory
filing fees and travel, lodging and meals, and (ii) amounts paid by Distributor
to dealers or other persons entering into a selling or servicing agreement with
Distributor.
4.3 Subject to and calculated in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., if during any
annual period the total of the compensation payable and out-of-pocket
reimbursements under Sections 4.1 and 4.2 to the Distributor exceeds 0.25% of a
Fund's average daily net assets, the Distributor will rebate that portion of its
fee necessary to result in the total of (i) and (ii) above not exceeding 0.25%
of the Fund's average daily net assets. The payment of compensation and
reimbursement of expenditures is authorized pursuant to the Trust's Service and
Distribution Plan under Rule 12b-1 under the 1940 Act.
5. INDEMNIFICATION.
5.1(a) The Trust authorizes Distributor to use the Trust's current
prospectus, in the form furnished to Distributor from time to time, in
connection with the sale of Shares. The Trust shall indemnify, defend and hold
the Distributor, and each of its present or former directors, officers,
employees, representatives and any person who controls or previously controlled
the Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all losses, claims, demands, liabilities,
damages and expenses (including the costs of investigating or defending any
alleged losses, claims, demands, liabilities, damages or expenses and any
counsel fees incurred in connection therewith) which Distributor, each of its
present and former directors, officers, employees or representatives or any such
controlling person, may incur arising out of or based upon (i) any material
breach by the Trust of a material provision of this Agreement, and (ii) any
untrue statement, or alleged untrue statement, of a material fact contained in
the Trust's registration statement or current prospectus, as from time to time
amended or supplemented, or arising out of or 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; provided, however,
that the Trust's obligation to indemnify Distributor and any of the foregoing
indemnitees shall not be deemed to cover any losses, claims, demands,
liabilities, damages or expenses arising out of any untrue statement or alleged
untrue statement or omission or alleged omission made in the registration
statement or prospectus in reliance upon and in conformity with information
relating to the Distributor and furnished to the Trust or its counsel by
Distributor for the purpose of, and used in, the preparation thereof; and
provided further that the Trust's agreement to indemnify Distributor and any of
the foregoing indemnitees shall not be deemed to cover any liability to the
Trust or its shareholders to which Distributor would otherwise be subject by
reason of its willful misfeasance, bad faith or negligence in the performance of
its duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement. The Trust's agreement to indemnify the Distributor, and
any of the foregoing indemnitees, as the case may be, with respect to any
action, is expressly conditioned upon the Trust being notified in reasonable
detail of such action brought against Distributor, or any of the foregoing
indemnitees, within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Distributor, or such person, such notification to be given by letter or
by telegram addressed to the Trust's President, but the failure so to notify the
Trust of any such action shall not relieve the Trust from any liability which
the Trust may have to the person against whom such action is brought by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Trust's indemnity agreement contained
in this Section 5.1.
5.1(b) The Trust shall be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage or expense, but if the
Trust elects to assume the defense, such defense shall be conducted by counsel
chosen by the Trust and approved by the Distributor, which approval shall not be
unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain such counsel, the indemnified defendant or defendants
in such suit shall bear the fees and expenses of any additional counsel retained
by them. If the Trust does not elect to assume the defense of any such suit, or
in case the Distributor does not, in the exercise of reasonable judgment,
approve of counsel chosen by the Trust, the Trust will reimburse the indemnified
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor and them. The Trust's
indemnification agreement contained in this Section 5.1 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Distributor, and each of its present or former directors, officers,
employees, representatives or any controlling person, and shall survive the
delivery of any Shares and the termination of this Agreement. This Agreement of
indemnity will inure exclusively to the Distributor's benefit, to the benefit of
each of its present or former directors, officers, employees or representatives
and to the benefit of any controlling persons and their successors. The Trust
agrees promptly to notify Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or trustees in connection
with the issue and sale of any of the Shares.
5.2(a) Distributor shall indemnify, defend and hold the Trust, and each
of its present or former trustees, officers, employees, representatives, and any
person who controls or previously controlled the Trust within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities, damages and expenses (including the costs
of investigating or defending any alleged losses, claims, demands, liabilities,
damages or expenses, and any counsel fees incurred in connection therewith)
which the Trust, and each of its present or former trustees, officers,
employees, representatives, or any such controlling person, may incur arising
out of or based upon (i) any material breach by the Distributor of a material
provision of this Agreement, and (ii) any untrue, or alleged untrue, statement
of a material fact contained in the Trust's registration statement or any
prospectus, as from time to time amended or supplemented, or the omission, or
alleged omission, to state therein a material fact required to be stated therein
or necessary to make the statement not misleading, but only if such statement or
omission was made in reliance upon, and in conformity with, information relating
to the Distributor and furnished to the Trust or its counsel by the Distributor
for the purpose of, and used in, the preparation thereof. Distributor's
agreement to indemnify the Trust and any of the foregoing indemnitees shall not
be deemed to cover any liability to Distributor to which the Trust would
otherwise be subject by reason of its willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties, under this Agreement. The Distributor's
agreement to indemnify the Trust, and any of the foregoing indemnitees, is
expressly conditioned upon the Distributor's being notified in reasonable detail
of any action brought against the Trust, and any of the foregoing indemnitees,
such notification to be given by letter or telegram addressed to Distributor's
President, within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Trust or such person, but the failure so to notify Distributor of any
such action shall not relieve Distributor from any liability which Distributor
may have to the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, otherwise than on account of
Distributor's indemnity agreement contained in this Section 5.2(a).
5.2(b) In case any action shall be brought against the Trust, and each
of its present or former trustees, officers, employees, representatives, or
controlling persons, in respect of which indemnity may be sought against the
Distributor, the Distributor shall have the rights and duties given to the
Trust, and the Trust and each person so indemnified shall have the rights and
duties given to the Distributor by the provisions of Section 5.1(b).
6. OFFERING OF SHARES.
No Shares shall be offered by either Distributor or the Trust under any of
the provisions of this Agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act, or if and so long as current prospectuses as required by Section 10 of the
1933 Act, as amended, are not on file with the Commission; provided, however,
that nothing contained in this Paragraph 6 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectuses or
Agreement and Declaration of Trust.
7. TERM.
7.1 This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed. Unless sooner terminated as provided herein,
this Agreement shall continue in effect with respect to each Fund until ______,
1997. Thereafter, if not terminated, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Trust's
Board of Trustees or (ii) the vote of a majority (as defined in the 1940 Act) of
the outstanding voting securities of a Fund, and provided that in either event
the continuance is also approved by the Distributor and a majority of the
Trust's Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
7.2 This Agreement may be terminated without penalty with respect to a
particular Fund (i) through a failure to renew this Agreement at the end of a
term, (ii) upon mutual consent of the parties, or (iii) on no less than thirty
(30) days' written notice, by the Trust's Board of Trustees, by vote of a
majority (as defined with respect to voting securities in the 1940 Act) of the
outstanding voting securities of a Fund, or by the Distributor (which notice may
be waived by the party entitled to such notice). The terms of this Agreement
shall not be waived, altered, modified, amended or supplemented in any manner
whatsoever except by a written instrument signed by the Distributor and the
Trust. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act).
8. MISCELLANEOUS.
8.1 The services of the Distributor rendered to the Funds are not deemed
to be exclusive. The Distributor may render such services and any other
services to others, including other investment companies. The Trust recognizes
that from time to time directors, officers, and employees of the Distributor may
serve as directors, trustees, officers and/or employees of other entities
(including other investment companies), that such other entities may include the
name of the Distributor as part of their name and that the Distributor or its
affiliates may enter into distribution, administration, fund accounting,
transfer agent or other agreements with such other entities.
8.2 Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information relative to the Funds and prior, present or potential shareholders
of the Funds (and clients of said shareholders), and not to use such records and
information for any purpose other than performance of Distributor's
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld when the Distributor is subject to regulatory
audit or inspection, when Distributor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities with proper jurisdiction, or when so
requested by the Trust.
8.3 This Agreement shall be governed by Wisconsin law. To the extent that
the applicable laws of the State of Wisconsin, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control, and nothing herein shall be construed in a manner inconsistent with the
1940 Act or any rule or order of the Commission thereunder. Any provision of
this Agreement which may be determined by competent authority to be prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.4 Any notice required or to be permitted to be given by either party
to the other shall be in writing and shall be deemed to have been given when
hand delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, as follows: Notice to the Distributor shall be sent to
Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin, 53202, Attention: Miriam M. Allison, and notice to the Trust shall
be sent to The Purisima Funds, at 13100 Skyline Blvd., Woodside, California
94061, Attention: Kenneth L. Fisher.
8.5 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
THE PURISIMA FUNDS
(the "Trust")
By:
--------------------------------------
Kenneth L. Fisher
President
SUNSTONE FINANCIAL GROUP, INC.
("Distributor")
By:
--------------------------------------
Miriam M. Allison
President
EXHIBIT 8
CUSTODY AGREEMENT
DATED _______________, 199_
BETWEEN
UMB BANK, N.A.
AND
THE PURISIMA FUNDS
ON BEHALF OF
PURISIMA TOTAL RETURN FUND
Prototype Custody Agreement
for
Registered Investment Companies
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
1. Appointment of Custodian 1
2. DEFINITIONS 1
(a) Securities 1
(b) Assets 2
(c) Instructions and Special Instructions 2
3. DELIVERY OF CORPORATE DOCUMENTS 2
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN 3
(a) Safekeeping 3
(b) Manner of Holding Securities 4
(c) Free Delivery of Assets 5
(d) Exchange of Securities 6
(e) Purchases of Assets 6
(f) Sales of Assets 7
(g) Options 7
(h) Futures Contracts 8
(i) Segregated Accounts 8
(j) Depositary Receipts 9
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 9
(l) Interest Bearing Deposits 10
(m) Foreign Exchange Transactions 10
(n) Pledges or Loans of Securities 11
(o) Stock Dividends, Rights, Etc. 12
(p) Routine Dealings 12
(q) Collections 12
(r) Bank Accounts 12
(s) Dividends, Distributions and Redemptions 13
(t) Proceeds from Shares Sold 13
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 13
(v) Books and Records 14
(w) Opinion of Fund's Independent Certified Public
Accountants 14
(x) Reports by Independent Certified Public Accountants 14
(y) Bills and Others Disbursements 14
5. SUBCUSTODIANS 14
(a) Domestic Subcustodians 15
(b) Foreign Subcustodians 15
(c) Interim Subcustodians 16
(d) Special Subcustodians 17
(e) Termination of a Subcustodian 17
(f) Certification Regarding Foreign Subcustodians 17
6. STANDARD OF CARE 17
(a) General Standard of Care 17
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign
Risk, Etc. 17
(c) Liability for Past Records 18
(d) Advice of Counsel 18
(e) Advice of the Fund and Others 18
(f) Instructions Appearing to be Genuine 18
(g) Exceptions from Liability 19
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS 19
(a) Domestic Subcustodians 19
(b) Liability for Acts and Omissions of Foreign
Subcustodians 19
(c) Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities Depositories and
Clearing Agencies 19
(d) Defaults or Insolvencies of Brokers, Banks, Etc. 20
(e) Reimbursement of Expenses 20
8. INDEMNIFICATION 20
(a) Indemnification by Fund 20
(b) Indemnification by Custodian 20
9. ADVANCES 21
10. LIENS 21
11. COMPENSATION 22
12. POWERS OF ATTORNEY 22
13. TERMINATION AND ASSIGNMENT 22
14. ADDITIONAL FUNDS 22
15. NOTICES 23
16. MISCELLANEOUS 23
CUSTODY AGREEMENT
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This agreement made as of this _____ day of_______________, 199_,
between UMB Bank, n.a., a national banking association with its principal place
of business located at Kansas City, Missouri (hereinafter "Custodian"), and
each of the Funds which have executed the signature page hereof together with
such additional Funds which shall be made parties to this Agreement by the
execution of a separate signature page hereto (individually, a "Fund" and
collectively, the "Funds").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
------------------------
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
-----------
For purposes of this Agreement, the following terms shall have the meanings
so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills,
rights, script, warrants, interim certificates and all negotiable or
nonnegotiable paper commonly known as Securities and other instruments or
obligations.
(b) "Assets" shall mean Securities, monies and other property held
by the Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested
telex, a written (including, without limitation, facsimile transmission)
request, direction, instruction or certification signed or initialed by or on
behalf of a Fund by an Authorized Person; (ii) a telephonic or other oral
communication from a person the Custodian reasonably believes to be an
Authorized Person; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) on behalf of a Fund. Instructions in the form of oral
communications shall be confirmed by the appropriate Fund by tested telex or in
writing in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral Instructions prior to the Custodian's receipt of such
confirmation. Each Fund authorizes the Custodian to record any and all
telephonic or other oral Instructions communicated to the Custodian.
(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(4) Where appropriate, Instructions and Special Instructions shall be
continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
-------------------------------
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund
as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
Each Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, each Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of each such Fund who will have
continuing authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Instructions
or any other notice, request, direction, instruction, certificate or instrument
on behalf of each Fund, and (b) the names, titles and signatures of those
persons authorized to countersign or confirm Special Instructions on behalf of
each Fund (in both cases collectively, the "Authorized Persons" and
individually, an "Authorized Person"). Such Resolutions and certificates may
be accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar Resolution or certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Instructions or to countersign
or confirm Special Instructions, such persons shall no longer be considered an
Authorized Person authorized to give Instructions or to countersign or confirm
Special Instructions. Unless the certificate specifically requires that the
approval of anyone else will first have been obtained, the Custodian will be
under no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding any of the
foregoing, no Instructions or Special Instructions received by the Custodian
from a Fund will be deemed to authorize or permit any director, trustee,
officer, employee, or agent of such Fund to withdraw any of the Assets of such
Fund upon the mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
--------------------------------------------------------
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) SAFEKEEPING.
The Custodian will keep safely the Assets of each Fund which are
delivered to it from time to time. The Custodian shall not be responsible for
any property of a Fund held or received by such Fund and not delivered to the
Custodian.
(b) MANNER OF HOLDING SECURITIES.
(1) The Custodian shall at all times hold Securities of each Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities which
have been delivered to it in physical form, by registering the same in the name
of the appropriate Fund or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Fund and Custodian, respectively, shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the
contrary, the Custodian will register all such portfolio Securities in the name
of the Custodian's authorized nominee. All such Securities shall be held in an
account of the Custodian containing only assets of the appropriate Fund or only
assets held by the Custodian as a fiduciary, provided that the records of the
Custodian shall indicate at all times the Fund or other customer for which such
Securities are held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities
owned by a Fund in, and each Fund hereby approves use of: (a) The Depository
Trust Company; (b) The Participants Trust Company; and (c) any book-entry system
as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through one
or more agents or Subcustodians which are also qualified to act as custodians
for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities in a
Securities System, provided that such Securities are represented in an account
("Account") of the Custodian in the Securities System that includes only
assets held by the Custodian as a fiduciary, custodian or otherwise for
customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the account
of a Fund only upon (a) receipt of advice from the Securities System that such
Securities have been transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
such Fund. The Custodian shall transfer Securities sold for the account of a
Fund only upon (a) receipt of advice from the Securities System that payment for
such Securities has been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of such Fund. Copies of all advices from the Securities System
relating to transfers of Securities for the account of a Fund shall be
maintained for such Fund by the Custodian. The Custodian shall deliver to a
Fund on the next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the account of such
Fund. Such transaction reports shall be delivered to such Fund or any agent
designated by such Fund pursuant to Instructions, by computer or in such other
manner as such Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund pursuant to
Instructions, provide such Fund with reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(c) FREE DELIVERY OF ASSETS.
Notwithstanding any other provision of this Agreement and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) EXCHANGE OF SECURITIES.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Fund for other Securities or cash paid in connection
with any reorganization, recapitalization, merger, consolidation, or conversion
of convertible Securities, and will deposit any such Securities in accordance
with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) PURCHASES OF ASSETS.
(1) SECURITIES PURCHASES. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has
received Special Instructions to the contrary, such payment will be made only
upon receipt of Securities by the Custodian, a clearing corporation of a
national Securities exchange of which the Custodian is a member, or a Securities
System in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, upon receipt of Instructions: (i) in connection
with a repurchase agreement, the Custodian may release funds to a Securities
System prior to the receipt of advice from the Securities System that the
Securities underlying such repurchase agreement have been transferred by book-
entry into the Account maintained with such Securities System by the Custodian,
provided that the Custodian's instructions to the Securities System require that
the Securities System may make payment of such funds to the other party to the
repurchase agreement only upon transfer by book-entry of the Securities
underlying the repurchase agreement into such Account; (ii) in the case of
Interest Bearing Deposits, currency deposits, and other deposits, foreign
exchange transactions, futures contracts or options, pursuant to Sections 4(g),
4(h), 4(l), and 4(m) hereof, the Custodian may make payment therefor before
receipt of an advice of transaction; and (iii) in the case of Securities as to
which payment for the Security and receipt of the instrument evidencing the
Security are under generally accepted trade practice or the terms of the
instrument representing the Security expected to take place in different
locations or through separate parties, such as commercial paper which is indexed
to foreign currency exchange rates, derivatives and similar Securities, the
Custodian may make payment for such Securities prior to delivery thereof in
accordance with such generally accepted trade practice or the terms of the
instrument representing such Security.
(2) OTHER ASSETS PURCHASED. Upon receipt of Instructions and except
as otherwise provided herein, the Custodian shall pay for and receive other
Assets for the account of a Fund as provided in Instructions.
(f) SALES OF ASSETS.
(1) SECURITIES SOLD. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) OTHER ASSETS SOLD. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of a Fund as provided in Instructions.
(g) OPTIONS.
(1) Upon receipt of Instructions relating to the purchase of an
option or sale of a covered call option, the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of the option by a Fund; (b) if the transaction involves the sale of a
covered call option, deposit and maintain in a segregated account the Securities
(either physically or by book-entry in a Securities System) subject to the
covered call option written on behalf of such Fund; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any notices or
other communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked
option (including stock index and commodity options), the Custodian, the
appropriate Fund and the broker-dealer shall enter into an agreement to comply
with the rules of the OCC or of any registered national securities exchange or
similar organizations(s). Pursuant to that agreement and such Fund's
Instructions, the Custodian shall: (a) receive and retain confirmations or
other documents, if any, evidencing the writing of the option; (b) deposit and
maintain in a segregated account, Securities (either physically or by book-entry
in a Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The appropriate Fund and the broker-dealer shall be
responsible for determining the quality and quantity of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements and the performance of other terms of any option contract.
(h) FUTURES CONTRACTS.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the appropriate Fund, the Custodian and the
designated futures commission merchant (a "Procedural Agreement"). Under the
Procedural Agreement the Custodian shall: (a) receive and retain confirmations,
if any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by such Fund; (b) deposit and maintain in a segregated account
cash, Securities and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements.
The appropriate Fund and such futures commission merchant shall be responsible
for determining the type and amount of Assets held in the segregated account or
paid to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
(i) SEGREGATED ACCOUNTS.
Upon receipt of Instructions, the Custodian shall establish and
maintain on its books a segregated account or accounts for and on behalf of a
Fund, into which account or accounts may be transferred Assets of such Fund,
including Securities maintained by the Custodian in a Securities System pursuant
to Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
purpose of compliance by such Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) DEPOSITARY RECEIPTS.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depositary to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) CORPORATE ACTIONS, PUT BONDS, CALLED BONDS, ETC.
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the appropriate Fund of such action in writing by
facsimile transmission or in such other manner as such Fund and Custodian may
agree in writing.
The Fund agrees that if it gives an Instruction for the performance of an
act on the last permissible date of a period established by any optional offer
or on the last permissible date for the performance of such act, the Fund shall
hold the Bank harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) INTEREST BEARING DEPOSITS.
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) FOREIGN EXCHANGE TRANSACTIONS.
(l) Each Fund hereby appoints the Custodian as its agent in the
execution of all currency exchange transactions. The Custodian agrees to
provide exchange rate and U.S. Dollar information, in writing, to the Funds.
Such information shall be supplied by the Custodian at least by the business day
prior to the value date of the foreign exchange transaction, provided that the
Custodian receives the request for such information at least two business days
prior to the value date of the transaction.
(2) Upon receipt of Instructions, the Custodian shall settle
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery on behalf of and for the account of a Fund with
such currency brokers or Banking Institutions as such Fund may determine and
direct pursuant to Instructions. If, in its Instructions, a Fund does not
direct the Custodian to utilize a particular currency broker or Banking
Institution, the Custodian is authorized to select such currency broker or
Banking Institution as it deems appropriate to execute the Fund's foreign
currency transaction.
(3) Each Fund accepts full responsibility for its use of third
party foreign exchange brokers and for execution of said foreign exchange
contracts and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred as a result of the failure or
delay of its third party broker to deliver foreign exchange. The Custodian
shall have no responsibility or liability with respect to the selection of the
currency brokers or Banking Institutions with which a Fund deals or the
performance of such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein,
upon receipt of Instructions the Custodian may, in connection with a foreign
exchange contract, make free outgoing payments of cash in the form of U.S.
Dollars or foreign currency prior to receipt of confirmation of such foreign
exchange contract or confirmation that the countervalue currency completing such
contract has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign
exchange transactions as principal. However, if the Custodian has made
available to a Fund its services as a principal in foreign exchange transactions
and subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund, with the Custodian as principal.
(n) PLEDGES OR LOANS OF SECURITIES.
(1) Upon receipt of Instructions from a Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by such Fund with various lenders including but not limited to
UMB Bank, n.a.; provided, however, that the Securities shall be released only
upon payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions,
the Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing. The Custodian
shall have no responsibility or liability for any loss arising from the delivery
of Securities prior to the receipt of collateral. Upon receipt of Instructions
and the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) STOCK DIVIDENDS, RIGHTS, ETC.
The Custodian shall receive and collect all stock dividends, rights,
and other items of like nature and, upon receipt of Instructions, take action
with respect to the same as directed in such Instructions.
(p) ROUTINE DEALINGS.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of each Fund except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from any particular
Fund. The Custodian may also make payments to itself or others from the Assets
for disbursements and out-of-pocket expenses incidental to handling Securities
or other similar items relating to its duties under this Agreement, provided
that all such payments shall be accounted for to the appropriate Fund.
(q) COLLECTIONS.
The Custodian shall (a) collect amounts due and payable to each
Fund with respect to portfolio Securities and other Assets; (b) promptly credit
to the account of each Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and any particular Fund; (c) promptly endorse and deliver any
instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Fund. The Custodian
shall notify a Fund in writing by facsimile transmission or in such other manner
as such Fund and Custodian may agree in writing if any amount payable with
respect to portfolio Securities or other Assets is not received by the Custodian
when due. The Custodian shall not be responsible for the collection of amounts
due and payable with respect to portfolio Securities or other Assets that are in
default.
(r) BANK ACCOUNTS.
Upon Instructions, the Custodian shall open and operate a bank account
or accounts on the books of the Custodian; provided that such bank account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
one or more Funds, and shall be subject only to draft or order of the Custodian.
The responsibilities of the Custodian to any one or more such Funds for deposits
accepted on the Custodian's books shall be that of a U.S. bank for a similar
deposit.
(s) DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS.
To enable each Fund to pay dividends or other distributions to
shareholders of each such Fund and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such Fund
(collectively, the "Shares"), the Custodian shall release cash or Securities
insofar as available. In the case of cash, the Custodian shall, upon the
receipt of Instructions, transfer such funds by check or wire transfer to any
account at any bank or trust company designated by each such Fund in such
Instructions. In the case of Securities, the Custodian shall, upon the receipt
of Special Instructions, make such transfer to any entity or account designated
by each such Fund in such Special Instructions.
(t) PROCEEDS FROM SHARES SOLD.
The Custodian shall receive funds representing cash payments received
for shares issued or sold from time to time by each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued by
such Fund by facsimile transmission or in such other manner as such Fund and the
Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for shares as may
be set forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to a Fund as of
specified times agreed upon from time to time by such Fund and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund.
(u) PROXIES AND NOTICES; COMPLIANCE WITH THE SHAREHOLDERS
COMMUNICATION ACT OF 1985.
The Custodian shall deliver or cause to be delivered to the
appropriate Fund all forms of proxies, all notices of meetings, and any other
notices or announcements affecting or relating to Securities owned by such Fund
that are received by the Custodian, any Subcustodian, or any nominee of either
of them, and, upon receipt of Instructions, the Custodian shall execute and
deliver, or cause such Subcustodian or nominee to execute and deliver, such
proxies or other authorizations as may be required. Except as directed pursuant
to Instructions, neither the Custodian nor any Subcustodian or nominee shall
vote upon any such Securities, or execute any proxy to vote thereon, or give any
consent or take any other action with respect thereto.
The Custodian will not release the identity of any Fund to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific purpose of direct communications between such issuer
and any such Fund unless a particular Fund directs the Custodian otherwise in
writing.
(v) BOOKS AND RECORDS.
The Custodian shall maintain such records relating to its activities
under this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be
open for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the appropriate Fund during normal business
hours of the Custodian.
The Custodian shall provide accountings relating to its activities
under this Agreement as shall be agreed upon by each Fund and the Custodian.
(w) OPINION OF FUND'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
The Custodian shall take all reasonable action as each Fund may
request to obtain from year to year favorable opinions from each such Fund's
independent certified public accountants with respect to the Custodian's
activities hereunder and in connection with the preparation of each such Fund's
periodic reports to the SEC and with respect to any other requirements of the
SEC.
(x) REPORTS BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
such Fund and as may reasonably be obtained by the Custodian.
(y) BILLS AND OTHER DISBURSEMENTS.
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of a Fund.
5. SUBCUSTODIANS.
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From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Funds. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) DOMESTIC SUBCUSTODIANS.
The Custodian may, at any time and from time to time, appoint any bank
as defined in Section 2(a)(5) of the 1940 Act or any trust company or other
entity, any of which meet the requirements of a custodian under Section 17(f) of
the 1940 Act and the rules and regulations thereunder, to act for the Custodian
on behalf of any one or more Funds as a subcustodian for purposes of holding
Assets of such Fund(s) and performing other functions of the Custodian within
the United States (a "Domestic Subcustodian"). Each Fund shall approve in
writing the appointment of the proposed Domestic Subcustodian; and the
Custodian's appointment of any such Domestic Subcustodian shall not be effective
without such prior written approval of the Fund(s). Each such duly approved
Domestic Subcustodian shall be listed on Appendix A attached hereto, as it may
be amended, from time to time.
(b) FOREIGN SUBCUSTODIANS.
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Fund(s) and performing other
functions of the Custodian in countries other than the United States of America
(hereinafter referred to as a "Foreign Subcustodian" in the context of either
a subcustodian or a sub-subcustodian); provided that the Custodian shall have
obtained written confirmation from each Fund of the approval of the Board of
Directors or other governing body of each such Fund (which approval may be
withheld in the sole discretion of such Board of Directors or other governing
body or entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or countries in
which, and the securities depositories or clearing agencies (hereinafter
"Securities Depositories and Clearing Agencies"), if any, through which, the
Custodian or any proposed Foreign Subcustodian is authorized to hold Securities
and other Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed Foreign
Subcustodian. Each such duly approved Foreign Subcustodian and the countries
where and the Securities Depositories and Clearing Agencies through which they
may hold Securities and other Assets of the Fund(s) shall be listed on Appendix
A attached hereto, as it may be amended, from time to time. Each Fund shall be
responsible for informing the Custodian sufficiently in advance of a proposed
investment which is to be held in a country in which no Foreign Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the appropriate arrangements
with a proposed Foreign Subcustodian, including obtaining approval as provided
in this Section 5(b). In connection with the appointment of any Foreign
Subcustodian, the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian in form and
substance approved by each such Fund. The Custodian shall not consent to the
amendment of, and shall cause any Domestic Subcustodian not to consent to the
amendment of, any agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except upon prior
written approval of such Fund pursuant to Special Instructions.
(c) INTERIM SUBCUSTODIANS.
Notwithstanding the foregoing, in the event that a Fund shall invest
in an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify such Fund in writing by facsimile
transmission or in such other manner as such Fund and the Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from such Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an "Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) SPECIAL SUBCUSTODIANS.
Upon receipt of Special Instructions, the Custodian shall, on behalf
of a Fund, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act for the Custodian on behalf of
such Fund as a subcustodian for purposes of: (i) effecting third-party
repurchase transactions with banks, brokers, dealers or other entities through
the use of a common custodian or subcustodian; (ii) providing depository and
clearing agency services with respect to certain variable rate demand note
Securities, (iii) providing depository and clearing agency services with respect
to dollar denominated Securities, and (iv) effecting any other transactions
designated by such Fund in such Special Instructions. Each such designated
subcustodian (hereinafter referred to as a "Special Subcustodian") shall be
listed on Appendix A attached hereto, as it may be amended from time to time.
In connection with the appointment of any Special Subcustodian, the Custodian
shall enter into a subcustodian agreement with the Special Subcustodian in form
and substance approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or waive any rights under such agreement, except upon prior
approval pursuant to Special Instructions.
(e) TERMINATION OF A SUBCUSTODIAN.
The Custodian may, at any time in its discretion upon notification to
the appropriate Fund(s), terminate any Subcustodian of such Fund(s) in
accordance with the termination provisions under the applicable subcustodian
agreement, and upon the receipt of Special Instructions, the Custodian will
terminate any Subcustodian in accordance with the termination provisions under
the applicable subcustodian agreement.
(f) CERTIFICATION REGARDING FOREIGN SUBCUSTODIANS.
Upon request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of such Fund; and (iii) such
other information as may be requested by such Fund, and as the Custodian shall
be reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
(a) GENERAL STANDARD OF CARE.
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such Fund resulting from
the gross negligence or willful misfeasance of the Custodian; provided, however,
in no event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) ACTIONS PROHIBITED BY APPLICABLE LAW, EVENTS BEYOND CUSTODIAN'S
CONTROL, SOVEREIGN RISK, ETC.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, Securities System, Securities Depository or
Clearing Agency utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a "Person") is
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of: (a) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or of
any foreign country, or political subdivision thereof or of any court of
competent jurisdiction (and neither the Custodian nor any other Person shall be
obligated to take any action contrary thereto); or (b) any event beyond the
control of the Custodian or other Person such as armed conflict, riots, strikes,
lockouts, labor disputes, equipment or transmission failures, natural disasters,
or failure of the mails, transportation, communications or power supply; or (ii)
for any loss, damage, cost or expense resulting from "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) LIABILITY FOR PAST RECORDS.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Fund, insofar
as such loss, damage or expense arises from the performance of the Custodian or
any Domestic Subcustodian in reliance upon records that were maintained for such
Fund by entities other than the Custodian or any Domestic Subcustodian prior to
the Custodian's employment hereunder.
(d) ADVICE OF COUNSEL.
The Custodian and all Domestic Subcustodians shall be entitled to
receive and act upon advice of counsel of its own choosing on all matters. The
Custodian and all Domestic Subcustodians shall be without liability for any
actions taken or omitted in good faith pursuant to the advice of counsel.
(e) ADVICE OF THE FUND AND OTHERS.
The Custodian and any Domestic Subcustodian may rely upon the advice
of any Fund and upon statements of such Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) INSTRUCTIONS APPEARING TO BE GENUINE.
The Custodian and all Domestic Subcustodians shall be fully protected
and indemnified in acting as a custodian hereunder upon any Resolutions of the
Board of Directors or Trustees, Instructions, Special Instructions, advice,
notice, request, consent, certificate, instrument or paper appearing to it to be
genuine and to have been properly executed and shall, unless otherwise
specifically provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from any Fund hereunder a certificate
signed by any officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) EXCEPTIONS FROM LIABILITY.
Without limiting the generality of any other provisions hereof,
neither the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
any Fund, the legality of the purchase thereof or evidence of ownership required
to be received by any such Fund, or the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Fund, or
the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings
or similar actions with respect to any Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund, or any such
Fund's currently effective Registration Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
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(a) DOMESTIC SUBCUSTODIANS
The Custodian shall be liable for the acts or omissions of any
Domestic Subcustodian to the same extent as if such actions or omissions were
performed by the Custodian itself.
(b) LIABILITY FOR ACTS AND OMISSIONS OF FOREIGN SUBCUSTODIANS.
The Custodian shall be liable to a Fund for any loss or damage to such
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) SECURITIES SYSTEMS, INTERIM SUBCUSTODIANS, SPECIAL SUBCUSTODIANS,
SECURITIES DEPOSITORIES AND CLEARING AGENCIES.
The Custodian shall not be liable to any Fund for any loss, damage or
expense suffered or incurred by such Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the gross negligence or willful
misfeasance of the Custodian.
(d) DEFAULTS OR INSOLVENCIES OF BROKERS, BANKS, ETC.
The Custodian shall not be liable for any loss, damage or expense
suffered or incurred by any Fund resulting from or occasioned by the actions,
omissions, neglects, defaults or insolvency of any broker, bank, trust company
or any other person with whom the Custodian may deal (other than any of such
entities acting as a Subcustodian, Securities System or Securities Depository
and Clearing Agency, for whose actions the liability of the Custodian is set out
elsewhere in this Agreement) unless such loss, damage or expense is caused by,
or results from, the gross negligence or willful misfeasance of the Custodian.
(e) REIMBURSEMENT OF EXPENSES.
Each Fund agrees to reimburse the Custodian for all out-of-pocket
expenses incurred by the Custodian in connection with this Agreement, but
excluding salaries and usual overhead expenses.
8. INDEMNIFICATION.
---------------
(a) INDEMNIFICATION BY FUND.
Subject to the limitations set forth in this Agreement, each Fund
agrees to indemnify and hold harmless the Custodian and its nominees from all
losses, damages and expenses (including attorneys' fees) suffered or incurred by
the Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If any Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to
such Fund being liable for the payment of money or incurring liability of some
other form, such Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) INDEMNIFICATION BY CUSTODIAN.
Subject to the limitations set forth in this Agreement and in addition
to the obligations provided in Sections 6 and 7, the Custodian agrees to
indemnify and hold harmless each Fund from all losses, damages and expenses
suffered or incurred by each such Fund caused by the gross negligence or willful
misfeasance of the Custodian.
9. ADVANCES.
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In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"),
makes any payment or transfer of funds on behalf of any Fund as to which there
would be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Fund, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Fund as
to which it is subsequently determined that such Fund has overdrawn its cash
account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable by the Fund on behalf of which the Advance was made on demand
by Custodian, unless otherwise agreed by such Fund and the Custodian, and shall
accrue interest from the date of the Advance to the date of payment by such Fund
to the Custodian at a rate agreed upon in writing from time to time by the
Custodian and such Fund. It is understood that any transaction in respect of
which the Custodian shall have made an Advance, including but not limited to a
foreign exchange contract or transaction in respect of which the Custodian is
not acting as a principal, is for the account of and at the risk of the Fund on
behalf of which the Advance was made, and not, by reason of such Advance, deemed
to be a transaction undertaken by the Custodian for its own account and risk.
The Custodian and each of the Funds which are parties to this Agreement
acknowledge that the purpose of Advances is to finance temporarily the purchase
or sale of Securities for prompt delivery in accordance with the settlement
terms of such transactions or to meet emergency expenses not reasonably
foreseeable by a Fund. The Custodian shall promptly notify the appropriate Fund
of any Advance. Such notification shall be sent by facsimile transmission or in
such other manner as such Fund and the Custodian may agree.
10. LIENS.
-----
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants a security interest therein to the Bank. The Fund
shall promptly reimburse the Bank for any such advance of cash or securities or
any such taxes, charges, expenses, assessments, claims or liabilities upon
request for payment, but should the Fund fail to so reimburse the Bank, the Bank
shall be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
------------
Each Fund will pay to the Custodian such compensation as is agreed to
in writing by the Custodian and each such Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
------------------
Upon request, each Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
--------------------------
Any Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the
appropriate Fund shall pay to the Custodian such fees as may be due the
Custodian hereunder as well as its reimbursable disbursements, costs and
expenses paid or incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets held by it
hereunder to the appropriate Fund or as otherwise designated by such Fund by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any Fund without the
respective consent of the other, duly authorized by a resolution by its Board of
Directors or Trustees.
14. ADDITIONAL FUNDS.
----------------
An additional Fund or Funds may become a party to
this Agreement after the date hereof by an instrument in writing to such effect
signed by such Fund or Funds and the Custodian. If this Agreement is terminated
as to one or more of the Funds (but less than all of the Funds) or if an
additional Fund or Funds shall become a party to this Agreement, there shall be
delivered to each party an Appendix B or an amended Appendix B, signed by each
of the additional Funds (if any) and each of the remaining Funds as well as the
Custodian, deleting or adding such Fund or Funds, as the case may be. The
termination of this Agreement as to less than all of the Funds shall not affect
the obligations of the Custodian and the remaining Funds hereunder as set forth
on the signature page hereto and in Appendix B as revised from time to time.
15. NOTICES.
-------
As to each Fund, notices, requests, instructions and other writings
delivered to The Purisima Funds, 13100 Skyline Boulevard, Woodside, California
94062-4547, postage prepaid, or to such other address as any particular Fund may
have designated to the Custodian in writing, shall be deemed to have been
properly delivered or given to a Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration Department of the Custodian at its office at 928 Grand
Boulevard, Kansas City, Missouri, or mailed postage prepaid, to the Custodian's
Securities Administration Department, Post Office Box 419226, Kansas City,
Missouri 64141, or to such other addresses as the Custodian may have designated
to each Fund in writing, shall be deemed to have been properly delivered or
given to the Custodian hereunder; provided, however, that procedures for the
delivery of Instructions and Special Instructions shall be governed by Section
2(c) hereof.
16. MISCELLANEOUS.
-------------
(a) This Agreement is executed and delivered in the State of Missouri
and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be
binding upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or
waived, in any manner except in writing, properly executed by both parties
hereto; provided, however, Appendix A may be amended from time to time as
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians, and
Securities Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of execution
hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
TERM SECTION
---- -------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liability 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(c)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody
Agreement to be executed by their respective duly authorized officers.
THE PURISIMA FUNDS
ATTEST:
By:
- ------------------- ---------------------
Name:
------------------
Title:
-----------------
Date:
------------------
UMB BANK, N.A.
ATTEST:
By:
- ------------------- ---------------------
Name:
-------------------
Title:
------------------
Date:
-------------------
APPENDIX A
CUSTODY AGREEMENT
-----------------
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
- --------- --------------------- -----------------
Euroclear
The Purisima Funds UMB Bank, n.a.
By: By:
-------------------------- --------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
Date: Date:
------------------------ ------------------------
APPENDIX B
CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are
hereby made parties to the Custody Agreement dated ______________, 199_, with
UMB Bank, n.a. ("Custodian") and The Purisima Funds, and agree to be bound by
all the terms and conditions contained in said Agreement:
LIST THE FUNDS
Purisima Total Return Fund
ATTEST:
- ---------------------- THE PURISIMA FUNDS
By:
--------------------
Name:
-------------------
Title:
-----------------
Date:
------------------
ATTEST:
- ---------------------- UMB BANK, N.A.
By:
--------------------
Name:
-------------------
Title:
-----------------
Date:
------------------
EXHIBIT 9.1
DRAFT DATED 9/10/96
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
--------------------------------------------
THIS AGREEMENT is made as of this ___ day of October, 1996, by and between
The Purisima Funds, a Delaware business trust, (the "Trust"), and Sunstone
Financial Group, Inc., a Wisconsin corporation (the "Administrator").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and is authorized
to issue shares of beneficial ownership (the "Shares") in separate series with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Trust and the Administrator desire to enter into an agreement
pursuant to which the Administrator shall provide administration and fund
accounting services to such investment portfolios of the Trust as are listed on
Schedule A hereto and any additional investment portfolios the Trust and
Administrator may agree upon and include on Schedule A as such Schedule may be
amended from time to time (such investment portfolios and any additional
investment portfolios are individually referred to as a "Fund" and collectively
the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the 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 the Administrator as administrator and fund
accountant of the Funds for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. SERVICES AS ADMINISTRATOR
(a) Subject to the direction and control of the Trust's Board of Trustees
and utilizing information provided by the Trust and its agents, the
Administrator will, in a timely manner: (1) provide office space, facilities,
equipment and personnel to carry out its services hereunder; (2) compile data
for and prepare with respect to the Funds timely notices to the Securities and
Exchange Commission (the "Commission") required pursuant to Rule 24f-2 under the
1940 Act and Semi-Annual Reports on Form N-SAR; (3) assist in the preparation
for execution by the Trust and file all federal income and excise tax returns
and state income tax returns (and such other required tax filings as may be
agreed to by the parties) other than those required to be made by the Trust's
custodian or transfer agent, subject to review and approval of the Trust and the
Trust's independent accountants; (4) prepare the financial statements for the
Annual and Semi-Annual Reports required pursuant to Section 30(d) under the 1940
Act; (5) assist the Trust's legal counsel in the preparation of the Registration
Statement for the Trust (on Form N-1A or any replacement therefor) and any
amendments thereto; (6) determine and periodically monitor the Funds' income and
expense accruals and cause all appropriate expenses to be paid from Trust assets
on proper authorization from the Trust; (7) calculate daily net asset values and
income factors of the Funds, (8) maintain all general ledger accounts and
related subledgers; (9) perform security valuations; (10) assist in the
acquisition of the Trust's fidelity bond required by the 1940 Act, monitor the
amount of the bond and make the necessary Commission filings related thereto;
(11) from time to time as the Administrator deems appropriate, check the Funds'
compliance with the policies and limitations of the Funds relating to the
portfolio investments as set forth in the Prospectus and Statement of Additional
Information and monitor each Fund's status as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (but these
functions shall not relieve the Trust's investment adviser and sub-advisers, if
any, of their primary day-to-day responsibility for assuring such compliance);
(12) maintain, and/or coordinate with the other service providers the
maintenance of, the accounts, books and other documents required pursuant to
Rule 31a-1(a) and (b) under the 1940 Act; (13) prepare and/or file all documents
required to be filed with states to register and maintain the registration of
the Shares in the states and in the amounts identified by the Trust; (14)
develop with legal counsel and secretary of the Trust an agenda and related
materials and resolutions for each board and committee meeting and, if requested
by the Trustees, attend board meetings and prepare minutes; (15) coordinate
preparation of other matters required to be reported to the board, including,
without limitation, details of Rule 12b-1 payments, codes of ethics compliance
and broker commissions; (16) prepare Form 1099s for Trustees and other fund
vendors; (17) calculate dividend and capital gains distributions subject to
review and approval by the Trust and its independent accountants; (18)
periodically oversee the activities of the Fund's transfer agent and custodian;
and (19) generally assist in the Trust's administrative operations as mutually
agreed to by the parties. The duties of the Administrator shall be confined to
those expressly set forth herein, and no implied duties are assumed by or may be
asserted against the Administrator hereunder.
(b) The Trustees of the Trust shall cause the officers, investment adviser,
legal counsel, independent accountants and custodian for the Trust to cooperate
with the Administrator and to provide the Administrator, upon request, with such
information, documents and advice relating to the Funds and the Trust as is
within the possession or knowledge of such persons, in order to enable the
Administrator to perform its duties hereunder. In connection with its duties
hereunder, and not withstanding anything herein to the contrary, the
Administrator shall be entitled to rely in good faith, and shall be held
harmless by the Trust when acting in reliance, upon the instruction, advice,
information or any documents relating to the Trust provided to the Administrator
by an "Authorized Person" of the Trust (as defined herein) or by any of the
aforementioned persons. Fees charged by such persons shall be an expense of the
Trust. The Administrator shall be entitled to rely on any document which it
reasonably believes to be genuine and to have been signed or presented by the
proper party. "Authorized Persons" of the Trust shall mean those individuals
identified as such in writing to the Administrator. The Administrator shall not
be held to have notice of any change of authority of any Authorized Person of
the Trust until receipt of written notice thereof from the Trust.
(c) In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Administrator hereby agrees that all records which it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. Subject to the terms of
Section 6, the Administrator further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records described in (a) above
which are maintained by the Administrator for the Trust.
(d) It is understood that in determining security valuations, the
Administrator employs one or more pricing services to determine valuations of
portfolio securities for purposes of calculating net asset values of the Funds.
The Administrator shall identify to the Trust and the Board of Trustees any
such pricing service utilized on behalf of the Trust. The Administrator is
authorized to rely on the prices provided by such service(s) or by the Funds'
investment adviser or other authorized representative of the Trust, and shall
not be liable for losses to the Trust or its security holders as a result of its
reasonable and good faith reliance on the valuations provided by the approved
pricing service(s) or the representative.
3. FEES; DELEGATION; EXPENSES
(a) In consideration of the services rendered pursuant to this Agreement,
the Trust will pay the Administrator a fee, computed daily and payable monthly,
as provided in Schedule B hereto, plus out-of-pocket expenses. The Trust shall
also pay the Administrator for organizational start-up services provided on
behalf of the Funds as specified in Schedule B. Out-of-pocket expenses include,
but are not limited to, travel, lodging and meals in connection with travel on
behalf of the Trust, programming and related expenses (previously incurred or to
be incurred by Administrator) in connection with providing electronic
transmission of data between the Administrator and the Funds' other service
providers, brokers, dealers and depositories, fees of pricing services, and
photocopying, postage and overnight delivery expenses. Administrator shall
endeavor to provide advance notice to the Trust before incurring any out-of-
pocket expense, other than those identified in the preceding sentence, which
will exceed $5,000. Fees shall be paid by the Funds at a rate that would
aggregate at least the applicable minimum fee for the respective Funds.
(b) For the purpose of determining fees payable to the Administrator, net
asset value shall be computed in accordance with the Trust's Prospectuses and
resolutions of the Trust's Board of Trustees. The fee for the period from the
day of the month this Agreement is entered into until the end of that month
shall be pro-rated according to the proportion which such period bears to the
full monthly period. Upon any termination of this Agreement before the end of
any month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. Should the Trust be
liquidated, merged with or acquired by another fund or investment company, any
accrued fees shall be immediately payable. Such fee as is attributable to each
Fund shall be a separate charge to each Fund and shall be the several (and not
joint or joint and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in connection with the
performance of its services under this Agreement except as otherwise provided
herein. Other costs and expenses to be incurred in the operation of the Trust,
including, but not limited to: taxes; interest; brokerage fees and commissions,
if any; salaries, fees and expenses of officers and Trustees; Commission fees
and state Blue Sky fees; advisory fees; charges of custodians, transfer agents,
dividend disbursing and accounting services agents; security pricing services;
insurance premiums; outside auditing and legal expenses; costs of organization
and maintenance of corporate existence; typesetting, printing, proofing and
mailing of prospectuses, statements of additional information, supplements,
notices and proxy materials for regulatory purposes and for distribution to
current shareholders; typesetting, printing, proofing and mailing and other
costs of shareholder reports; expenses in connection with the electronic
transmission of documents and information including electronic filings with the
Commission and the states; expenses incidental to holding meetings of the
Trust's shareholders and Trustees; and any extraordinary expenses; will be borne
by the Funds or their investment adviser. Expenses incurred for distribution of
shares, including the typesetting, printing, proofing and mailing of
prospectuses for persons who are not shareholders of the Trust, will be borne by
the Trust's investment adviser, except for such expenses permitted to be paid by
the Trust under a distribution plan adopted in accordance with applicable laws.
4. PROPRIETARY AND CONFIDENTIAL INFORMATION
The Administrator agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information relative to the Trust and the Funds and prior, present or potential
shareholders of the Trust (and clients of said shareholders), and not to use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Administrator may be exposed to civil
or criminal proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities with proper jurisdiction, when
subject to governmental or regulatory audit or investigation, or when so
requested by the Trust.
5. LIABILITY; INDEMNIFICATION; REPRESENTATIONS AND WARRANTIES
(a) The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust or the Funds in connection
with the matters to which this Agreement relates, except for a loss resulting
from the Administrator's willful misfeasance, bad faith or gross negligence in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Furthermore, notwithstanding
anything else herein to the contrary, the Administrator shall not be liable for
any action taken or omitted to be taken in accordance with instructions received
by the Administrator from an Authorized Person or other person identified in
Paragraph 2(b).
(b) The Administrator assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, errors, delay or any other loss whatsoever
caused by events beyond its reasonable control and that are not a result of
actions of the Administrator constituting its willful misfeasance, bad faith or
negligence. The Administrator will, however, take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Administrator's control.
(c) Each party represents to the other that all necessary proceedings
required by their respective charters have been taken to authorize them to enter
into and perform this Agreement. The Administrator represents that it is
currently in compliance, and will for the duration of this Agreement comply, in
all material respects, with all applicable laws and regulations governing its
performance of its duties under this Agreement. The Trust represents that it is
currently in compliance, and will for the duration of this Agreement comply, in
all material respects, with its Registration Statement and with all applicable
laws and regulations including those governing its registration and operation as
an investment company.
(d) The Administrator will hold the Trust harmless against any and all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) which are the result of Sunstone's willful misfeasance, bad
faith or negligence in the performance of its duties hereunder or its reckless
disregard by it of its obligations and duties under this Agreement.
(e) The Trust will hold the Administrator harmless against any and all
losses, claims damages, liabilities or expenses (including reasonable counsel
fees and expenses) not resulting from the Administrators' willful misfeasance,
bad faith or negligence in the performance of its duties hereunder or by
reckless disregard by it of its obligations and duties under this Agreement, and
harmless against any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from the
Administrator's reliance on instructions, advice, information or documents as
provided in section 2(b) of this Agreement.
6. TERM
(a) This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed. This Agreement shall continue in effect with
respect to each Fund until _________________, 1997 (the "Initial Term").
Thereafter, if not terminated as provided herein, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods.
(b) This Agreement may be terminated with respect to any one or more
particular Funds without penalty after the Initial Term (i) upon mutual consent
of the parties, or (ii) by either party upon not less than sixty (60) days'
written notice to the other party (which notice may be waived by the party
entitled to the notice). The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by a
written instrument signed by the Administrator and the Trust.
(c) Notwithstanding anything herein to the contrary, upon the termination of
this Agreement or the liquidation of a Fund or the Trust, the Administrator
shall deliver the records of the Fund(s) and/or Trust as the case may be to the
Trust or person(s) designated by the Trust and thereafter the Trust or its
designee shall be solely responsible for preserving the records for the periods
required by all applicable laws, rules and regulations. In addition, in the
event of termination of this Agreement, or the proposed liquidation or merger of
the Trust or a Fund(s), and the Trust requests the Administrator to provide
services in connection therewith, the Administrator shall provide such services
and be entitled to such compensation as the parties may mutually agree.
7. NON-EXCLUSIVITY
The services of the Administrator rendered to the Trust are not deemed to be
exclusive. The Administrator may render such services and any other services to
others, including other investment companies. The Trust recognizes that from
time to time directors, officers and employees of the Administrator may serve as
trustees, directors, officers and employees of other entities (including other
investment companies), that such other entities may include the name of the
Administrator as part of their name and that the Administrator or its affiliates
may enter into investment advisory or other agreements with such other entities.
8. GOVERNING LAW; INVALIDITY
This Agreement shall be governed by and construed in accordance with the
laws of the State of Wisconsin. To the extent that the applicable laws of the
State of Wisconsin, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control, and nothing
herein shall be construed in a manner inconsistent with the 1940 Act or any rule
or order of the Commission thereunder. Any provision of this Agreement which
may be determined by competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9. NOTICE OF DECLARATION OF TRUST
This Agreement is executed by or on behalf of the Trust with respect to each
of the Funds and the obligations hereunder are not binding upon any of the
Trustees, officers or shareholders of the Trust individually but are binding
only upon the Funds to which such obligations pertain and the assets and
property of such Funds. The Trust's Certificate of Trust is on file with the
Secretary of State of Delaware.
10. NOTICES
Any notice required or to be permitted to be given by either party to the
other shall be in writing and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Administrator shall be sent to Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202, Attention Miriam
M. Allison, and notice to the Trust shall be sent to The Purisima Funds, 13100
Skyline Boulevard, Woodside, California, 94062, Attention: Clayton P. Fisher.
11. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original agreement but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
THE PURISIMA FUNDS
(the "Trust")
By:
----------------------------------
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By:
----------------------------------
President
SCHEDULE A
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
THE PURISIMA FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
NAME OF FUND
------------
PURISIMA TOTAL RETURN FUND
SCHEDULE B
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
THE PURISIMA FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
Intending to be legally bound, the undersigned hereby amend and restate Schedule
B to the aforesaid Agreement to include the following fees for the following
investment portfolios:
MINIMUM
NAME OF FUND ANNUAL FEES ANNUAL FEE
- ------------ ---------------------------------------------- ----------
Total Return Fund Up to $50 Million 22.0 basis points $75,000
$50 Million to $100 Million 15.0 basis points
Over $100 Million 7.0 basis points
The minimum annual fee is subject to an automatic annual escalation of 5%.
Sunstone will notify the Trust of each such escalation but no amendment of this
Schedule B shall be required. The Trust shall pay the Administrator $________
for its initial start-up services for the Fund. The Trust shall also
pay/reimburse the Administrator's out-of-pocket expenses as described in the
Agreement. The foregoing fee schedule assumes a single Fund and a single class
of shares.
EXHIBIT 9.2
DRAFT DATED 9/10/96
TRANSFER AGENCY AGREEMENT
-------------------------
THIS AGREEMENT made as of the ___ day of October, 1996 by and between The
Purisima Funds, a Delaware business trust (the "Trust"), and Sunstone Investor
Services, LLC, a Wisconsin limited liability company ("Sunstone").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and
is authorized to issue shares of beneficial interest ("Shares") in separate
series with each such series representing the interests in a separate portfolio
of securities and other assets;
WHEREAS, the Trust desires to retain Sunstone to render the transfer agency
and other services contemplated hereby with respect to each of the investment
portfolios of the Trust as are listed on Schedule A hereto and any additional
investment portfolios the Trust and Sunstone may agree upon and include on
Schedule A as such Schedule may be amended from time to time (such investment
portfolios and any additional investment portfolios are individually referred to
as a "Fund" and collectively the "Funds"), and Sunstone is willing to render
such services.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE I
APPOINTMENT OF TRANSFER AGENT
A. APPOINTMENT.
1. The Trust hereby constitutes and appoints Sunstone as transfer agent
and dividend disbursing agent of all the Shares of the Funds during the period
of this Agreement, and Sunstone hereby accepts such appointment as transfer
agent and dividend disbursing agent and agrees to perform the duties thereof as
hereinafter set forth.
2. Sunstone shall perform the transfer agent and dividend disbursing
agent services described on Schedule B hereto. To the extent that the Trust
requests Sunstone to perform any additional services in a manner not consistent
with Sunstone's usual processing procedures, Sunstone and the Trust shall
mutually agree as to the services to be accomplished, the manner of
accomplishment and the compensation to which Sunstone shall be entitled with
respect thereto.
3. Sunstone may, in its discretion, appoint in writing other parties
qualified to perform transfer agency and shareholder services reasonably
acceptable to the Trust (individually, a "Sub-transfer Agent") to carry out
some or all of its responsibilities under this Agreement with respect to a Fund;
provided, however, that unless the Trust shall enter into a written agreement
with such Sub-transfer Agent, the Sub-transfer Agent shall be the agent of
Sunstone and not the agent of the Trust and, in such event Sunstone shall be
fully responsible for the acts or omissions of such Sub-transfer Agent and shall
not be relieved of any of its responsibilities hereunder by the appointment of
such Sub-transfer Agent.
4. Sunstone shall have no duties or responsibilities whatsoever
hereunder 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 Sunstone.
B. DOCUMENTS/RECORDS.
1. In connection with such appointment, the Trust shall deliver or
cause to be delivered the following documents to Sunstone:
a) A copy of the Agreement and Declaration of Trust and By-laws of
the Trust and all amendments thereto, and a copy of the resolutions of the Board
of Trustees of the Trust appointing Sunstone and authorizing the execution of
this Transfer Agency Agreement on behalf of the Funds; each certified by the
Secretary of the Trust;
b) A certificate signed by the President and Secretary of the Trust
specifying: the number of authorized Shares and the number of such authorized
Shares issued and currently outstanding, if any; the names and specimen
signatures of the officers of the Trust authorized to sign written stock
certificates, and the individuals authorized to provide oral instructions and to
sign written instructions and requests on behalf of the Trust and to change the
persons authorized to provide such instructions from time to time (hereinafter
referred to as "Authorized Person(s)"), it being understood Sunstone shall not
be held to have notice of any change in the authority of any Authorized Person
until receipt of written notice thereof from the Trust;
c) In the event the Trust issues Share certificates, specimen Share
certificates for each Fund in the form approved by the Board of Trustees of the
Trust (and in a format compatible with Sunstone's operating system), together
with a Certificate signed by the Secretary of the Trust as to such approval;
d) Copies of the Trust's Registration Statement, as amended to date,
and the most recently filed Post-Effective Amendment thereto, filed by the Trust
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"), and under the 1940 Act, as amended, together with
any applications filed in connection therewith; and
e) Opinion of counsel for the Trust filed as an exhibit to the
Trust's Registration Statement with respect to the validity of the authorized
and outstanding Shares and whether such Shares are fully paid and non-
assessable.
2. The Trust agrees to deliver or to cause to be delivered to Sunstone
in Milwaukee, Wisconsin, at the Trust's expense, all such documents, records and
information as Sunstone may reasonably request in order for Sunstone to perform
its services hereunder.
ARTICLE II
COMPENSATION & EXPENSES
A. COMPENSATION. In consideration for its services hereunder as transfer
agent and dividend disbursing agent, each Fund will pay to Sunstone such
compensation as shall be set forth in a separate fee schedule to be agreed to by
each Fund and Sunstone from time to time. The liability of each Fund to
Sunstone is such Fund's own liability and Sunstone agrees there is no joint and
several liabilities among the Funds. A copy of the initial fee schedule is
attached hereto as Schedule C.
B. EXPENSES. The Trust on behalf of each Fund also agrees to promptly
reimburse Sunstone for all reasonable out-of-pocket expenses or disbursements
incurred by Sunstone in connection with the performance of services under this
Agreement including, but not limited to, expenses for postage, express delivery
services, freight charges, envelopes, checks, drafts, forms (continuous or
otherwise), specially requested reports and statements, bank account service
fees and charges, telephone calls, telegraphs, stationery supplies, outside
printing and mailing firms, magnetic tapes, reels or cartridges (if sent to a
Fund or to a third party at a Fund's request) and magnetic tape handling
charges, on-site and off-site record storage, media for storage of records
(e.g., microfilm, microfiche, optical platters, computer tapes and disks),
computer equipment installed at a Fund's request at a Fund's or a third party's
premises, telecommunications equipment, telephone/telecommunication lines
between the Trust and its agents, on one hand, and Sunstone on the other, proxy
soliciting, processing and/or tabulating costs, transmission of statement data
for remote printing or processing, and transaction fees to the extent any of the
foregoing are paid by Sunstone. If requested by Sunstone, postage and other
out-of-pocket expenses are payable in advance, and in the event requested
postage is due at least seven days prior to the anticipated mail date. In the
event Sunstone requests advance payment, Sunstone shall not be obligated to
incur such expenses or perform the related service(s) until payment is received.
Sunstone may, at its option, arrange to have various service providers submit
invoices directly to the Trust for payment of out-of pocket expenses
reimbursable hereunder.
C. PAYMENT PROCEDURES.
1. Amounts due hereunder shall be due and paid by the respective Fund
on or before the thirtieth (30th) day after the date of the statement therefor
(the "Due Date"). Service fees are billed monthly, and out-of-pocket expenses
are billed as incurred (unless prepayment is requested by Sunstone). The Trust
is aware that its failure to pay all amounts in a timely fashion so that they
will be received by Sunstone on or before the Due Date will give rise to costs
to Sunstone not contemplated by this Agreement, including but not limited to
carrying, processing and accounting charges. Accordingly, in the event that any
amounts due hereunder are not received by Sunstone by the Due Date, a Fund shall
pay a late charge equal to one and one-half percent (1.5%) per month or the
maximum amount permitted by law, whichever is less. In addition, the Fund shall
pay reasonable attorney's fees and court costs of Sunstone if any amounts due
Sunstone are collected by or through an attorney. The parties hereby agree that
such late charge represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not properly due.
Acceptance of such late charge shall in no event constitute a waiver of a Fund's
default or prevent Sunstone from exercising any other rights and remedies
available to it.
2. In the event that any charges are disputed, the Fund shall, on or
before the Due Date, pay all undisputed amounts due hereunder and notify
Sunstone in writing of any disputed charges for out-of-pocket expenses which it
is disputing in good faith. Payment for such disputed charges shall be due on
or before the close of the tenth (10th) business day after the day on which
Sunstone provides to the Fund documentation which an objective observer would
agree reasonably supports the disputed charges. Late charges shall not begin to
accrue as to charges disputed in good faith until the fifteenth day after
Sunstone provides notice that it intends to impose late charges.
ARTICLE III
PROCESSING AND PROCEDURES
A. ISSUANCE, REDEMPTION AND TRANSFER OF SHARES
1. Sunstone acknowledges that it has received a copy of each Fund's
Prospectus (as hereinafter defined), which Prospectus describes how sales and
redemptions of shares of each Fund shall be made and Sunstone agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. "Fund Business Day" shall be
deemed to be each day on which the New York Stock Exchange is open for trading,
and "Prospectus" shall mean the last Fund prospectus, including all
unsuperceded supplements actually received by Sunstone from the Fund with
respect to which the Fund has indicated a registration statement under the 1933
Act has become effective, including the Statement of Additional Information,
incorporated by reference therein.
2. On each Fund Business Day Sunstone shall, as of the time at which
the net asset value of each Fund is computed, issue to and redeem from the
accounts specified in a purchase order or redemption request in proper form and
accepted by the Trust or its authorized agent or subagent, which in accordance
with the Prospectus is effective on such day, the appropriate number of full and
fractional Shares based on the net asset value per Share of the respective Fund
specified in an advice received on such Fund Business Day from or on behalf of
the Fund.
3. Upon the issuance of any Shares in accordance with this Agreement,
Sunstone shall not be responsible for the payment of any original issue or other
taxes required to be paid by a Fund in connection with such issuance of any
Shares.
4. Sunstone shall not be required to issue any Shares after it has
received from an Authorized Person or from an appropriate federal or state
authority written notification that the sale of Shares has been suspended or
discontinued, and Sunstone shall be entitled to rely upon such written
notification.
5. Upon receipt of a proper redemption request and monies paid to it by
the Custodian in connection with a redemption of Shares, Sunstone shall cancel
the redeemed Shares and after making appropriate deduction for any withholding
of taxes required of it by applicable law, make payment in accordance with the
Fund's redemption and payment procedures described in the Prospectus.
6. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph, Shares will be transferred or redeemed upon presentation to Sunstone
of Share certificates, if any, or instructions properly endorsed for transfer or
redemption, accompanied by such documents as Sunstone deems necessary to
evidence the authority of the person making such transfer or redemption, and
bearing satisfactory evidence of the payment of any applicable stock transfer
taxes. Sunstone reserves the right to refuse to transfer or redeem Shares until
it is satisfied that the endorsement on the stock certificate, if any, or
instructions is valid and genuine, and for that purpose it will require, unless
otherwise instructed by an Authorized Person or except as provided in sub-
paragraph (b) of this paragraph, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15. Sunstone
also reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the requested transfer or redemption is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers or
redemptions which Sunstone, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no reasonable basis to any claims adverse to
such transfer or redemption. Sunstone may, in effecting transfers and
redemptions of Shares, rely upon those provisions of the Uniform Act for the
Simplification of Fiduciary Security Transfers or the Uniform Commercial Code,
as the same may be amended from time to time, applicable to the transfer of
securities, and shall not be responsible for any act done or omitted by it in
good faith and without negligence in reliance upon such laws.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, Sunstone shall be fully protected by each Fund
in not requiring any instruments, documents, assurances, endorsements or
guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, or transfer, of Shares whenever Sunstone
reasonably believes in good faith that requiring the same would be inconsistent
with the transfer and redemption procedures as described in the Prospectus.
7. Notwithstanding any provision contained in this Agreement to the
contrary, Sunstone shall not be required or expected to require, as a condition
to any transfer or redemption of any Shares pursuant to a computer tape or
electronic data transmission, any documents to evidence the authority of the
person requesting the transfer or redemption and/or the payment of any stock
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Article and customary commercial practice with
respect to electronic transactions.
8. In connection with each purchase and each redemption of Shares,
Sunstone shall send such statements as are prescribed by the Federal securities
laws applicable to transfer agents or as described in the Prospectus. If the
Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, Sunstone will countersign, issue and mail to such shareholder at the
address set forth in the records of Sunstone a Share certificate for any full
Share requested.
9. On each Fund Business Day Sunstone shall supply the Trust or its
agent or subagent with a statement specifying with respect to the immediately
preceding Fund Business Day: the total number of Shares of the Funds (including
fractional Shares) issued and outstanding at the opening of business on such
day; the total number of Shares of the Funds sold on such day; the total number
of Shares of the Funds and the dollar amount redeemed from Shareholders by
Sunstone on such day; and the total number of Shares of the Funds issued and
outstanding. Sunstone shall endeavor to provide this information by 10:00 a.m.
Central Time on each such Business Day.
10. Procedures for effecting purchase, redemption or transfer
transactions accepted from investors by telephone or other methods shall be
established by mutual agreement between the Trust and Sunstone consistent with
the terms of the Prospectus. Sunstone upon notice to a the Trust may establish
such additional procedures, rules and regulations governing the transfer or
registration of Share certificates, if any, or the purchase, redemption or
transfer of Shares, as it may deem advisable and consistent with the Prospectus
and such rules and regulations generally adopted by mutual fund transfer agents.
Sunstone shall not be liable, and shall be held harmless by the Trust, for its
actions or omissions which are consistent with the foregoing procedures absent
fraud, bad faith or willful misconduct on the part of Sunstone or its agents.
B. DIVIDENDS AND DISTRIBUTIONS.
1. The Trust shall furnish to Sunstone a copy of a resolution of its
Board of Trustees, certified by the Secretary or any Assistant Secretary, either
(i) setting forth the date of the declaration of a dividend or distribution, the
date of accrual or payment, as the case may be, thereof, the record date as of
which shareholders entitled to payment, or accrual, as the case may be, shall be
determined, the amount per Share of such dividend or distribution, the payment
date on which all previously accrued and unpaid dividends are to be paid, and
the total amount, if any, payable to Sunstone on such payment date, or (ii)
authorizing the declaration of dividends and distributions on a daily or other
periodic basis and authorizing Sunstone to rely on a certificate of an
Authorized Person setting forth the information described in subsection (i) of
this paragraph.
2. In connection with a reinvestment of a dividend or distribution of
Shares of a Fund, Sunstone shall as of each Fund Business Day, as specified in a
certificate or resolution described in paragraph 1, issue Shares of the Fund
based on the net asset value per Share of such Fund specified in an advice
received from or on behalf of the Fund on such Fund Business Day.
3. Upon the mail date specified in such certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of Sunstone on behalf
of the Fund, an amount of cash, if any, sufficient for Sunstone to make the
payment, as of the mail date, specified in such Certificate or resolution, as
the case may be, to the Shareholders who were of record on the record date.
Sunstone will, upon receipt of any such cash, promptly make payment of such cash
dividends or distributions to the shareholders of record as of the record date.
Absent Sunstone's negligence, Sunstone shall not be liable for any improper
payments made in good faith and in accordance with a certificate or resolution
described in the preceding paragraph. If Sunstone shall not receive from the
Custodian sufficient cash to make payments of any cash dividend or distribution
to all shareholders of the Fund as of the record date, Sunstone shall promptly
notify the Fund and shall, upon notifying the Fund, withhold payment to all
shareholders of record as of the record date until sufficient cash is provided
to Sunstone.
4. It is understood that Sunstone in its capacity as transfer agent and
dividend disbursing agent shall in no way be responsible for the determination
of the rate or form of dividends or capital gain distributions due to the
shareholders pursuant to the terms of this Agreement. It is further understood
that Sunstone shall file in a timely manner with the Internal Revenue Service
and shareholders such appropriate federal tax forms concerning the payment of
dividend and capital gain distributions but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
C. AUTHORIZATION AND ISSUANCE OF SHARES; RECAPITALIZATION OR CAPITAL
ADJUSTMENT.
1. Prior to the effective date of any increase or decrease in the total
number of Shares authorized to be issued, or the issuance of any additional
Shares of a Fund pursuant to stock dividends, stock splits, recapiltalizations,
capital adjustments or similar transactions, the Trust agrees to deliver to
Sunstone such documents, certificates, reports and legal opinions as Sunstone
may reasonably request.
2. In the event a Fund issues Share certificates, Sunstone may issue
new Share certificates in place of certificates represented to have been lost,
stolen, or destroyed upon receiving written instructions from the shareholder
accompanied by proof of an indemnity or surety bond issued by a recognized
insurance institution specified by the Trust or Sunstone. If Sunstone receives
written notification from the shareholder or broker dealer that the certificate
issued was never received, and such notification is made within 30 days of the
date of issuance, Sunstone may reissue the certificate without requiring a
surety bond. Sunstone may also reissue certificates which are represented as
lost, stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing,
Sunstone will reissue a certificate upon written authorization from an
Authorized Person.
D. RECORDS.
1. Sunstone shall keep such records as are specified in Schedule D
hereto in the form and manner, and for such period, as it may deem advisable but
not inconsistent with the rules and regulations of appropriate government
authorities, in particular Rules 31a-2 and 31a-3 under the 1940 Act. Sunstone
may deliver to the Trust from time to time at its discretion, for safekeeping or
disposition by the Trust in accordance with law, such records, papers and
documents accumulated in the execution of its duties as such transfer agent, as
Sunstone may deem expedient, other than those which Sunstone is itself required
to maintain pursuant to applicable laws and regulations. The Trust shall assume
all responsibility for any failure thereafter to produce any record, paper,
canceled Share certificate, or other document so returned, if and when required.
To the extent required by Section 31 of the 1940 Act and the rules and
regulations thereunder, the records specified in Schedule D hereto maintained by
Sunstone, which have not been previously delivered to the Trust pursuant to the
foregoing provisions of this paragraph, shall be considered to be the property
of the Trust shall be made available upon request for inspection by the
officers, employees, and auditors of the Trust, and shall be delivered to the
Trust promptly upon request and in any event upon the date of termination of
this Agreement, in the form and manner kept by Sunstone on such date of
termination or such earlier date as may be requested by the Trust.
2. Sunstone agrees to keep all records and other information relative
to the Trust, the Funds and their shareholders confidential. In case of any
requests or demands for the inspection of the shareholder records of a Fund,
Sunstone will notify the Fund promptly and secure instructions from an
Authorized Person as to such inspection. The Trust's approval to produce the
records or information shall not be unreasonably withheld and may not be
withheld where Sunstone may be exposed to civil or criminal proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities with proper jurisdiction, when subject to governmental
or regulatory audit or investigation, or when so requested by the Trust.
Notwithstanding the foregoing, Sunstone may disclose information when requested
by a shareholder concerning an account as to which such shareholder claims a
legal or beneficial interest or when requested by the Trust, the shareholder or
the dealer of record as to such account.
ARTICLE IV
CONCERNING THE TRUST
A. REPRESENTATIONS. The Trust represents and warrants to Sunstone that:
(a) It is a Trust duly organized and existing under the laws of the
State of Delaware, it is empowered under applicable laws and by its Agreement
and Declaration of Trust and its By-Laws to enter into and perform this
Agreement, and all requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
(b) It is an investment company registered under the 1940 Act.
(c) A registration statement under the 1933 Act with respect to the
Shares is effective. The Trust or its agent upon instructions from the Trust
shall notify Sunstone if such registration statement or any state securities
registrations have been terminated, lapse or a stop order has been entered with
respect to the Shares.
B. COVENANTS.
1. The Trust or its agent upon instructions from the Trust will provide
to Sunstone copies of all amendments to its Agreement and Declaration of Trust
and By-laws made after the date of this Agreement. If requested by Sunstone,
each copy of the Agreement and Declaration of Trust and copies of all amendments
thereto shall be certified by the Secretary of the Trust. Each copy of the By-
Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Trustees, shall be certified by the Secretary of the Trust, if
requested by Sunstone.
2. The Trust shall promptly deliver to Sunstone written notice of any
change in the Authorized Persons, together with a specimen signature of each new
Authorized Person. In the event any Authorized Person who shall have signed
manually or whose facsimile signature shall have been affixed to blank Share
certificates shall die, resign or be removed prior to issuance of such Share
certificates, Sunstone may issue such Share certificates of the Trust
notwithstanding such death, resignation or removal, and the Trust shall promptly
deliver to Sunstone such approval, adoption or ratification as may be required
by law.
3. The Trust shall deliver to Sunstone each Fund's currently effective
Prospectus and, for purposes of this Agreement, Sunstone shall not be deemed to
have notice of any information contained in such Prospectus until a reasonable
time after it is actually received by Sunstone.
4. All requisite steps will be taken by the Trust or its agent upon
instructions from the Trust from time to time when and as necessary to register
the Funds' shares for sale in all states in which the Funds' shares shall at the
time be offered for sale and require registration. If at any time a Fund
receives notice of any stop order or other proceeding in any such state
affecting such registration or the sale of a Fund's shares, or of any stop order
or other proceeding under the federal securities laws affecting the sale of the
Fund's shares, the Trust or its agent upon instructions from the Trust will give
prompt notice thereof to Sunstone.
5. The Trust will comply in all material respects with all applicable
requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended,
the 1940 Act, blue sky laws, and any other applicable laws, rules and
regulations.
6. The Trust agrees that prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of Sunstone
hereunder, it shall advise Sunstone of such proposed change at least 30 days
prior to the intended date of the same, and shall proceed with such change only
if it shall have received the written consent of Sunstone thereto, which shall
not be unreasonably withheld.
ARTICLE V
CONCERNING THE TRANSFER AGENT
A. REPRESENTATIONS; COVENANTS. Sunstone represents, warrants and
covenant's to the Trust that:
1. It is a corporation duly organized and existing under the laws of
the State of Wisconsin, is empowered under applicable law and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement, and all
requisite corporate proceedings have been taken to authorize it to enter into
and perform this Agreement.
2. It is duly registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended, to the extent required.
3. It will comply in all material respects with all applicable
requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended,
the 1940 Act, blue sky laws, and any other applicable laws, rules and
regulations, as they relate to its duties and obligations under this Agreement.
4. It will make available such reports as may reasonably be requested
by the Trust to enable the Board of Trustees to monitor the services being
provided hereunder. The costs of non-standard reports shall be the
responsibility of the Trust.
B. LIMITATION OF LIABILITY.
1. Sunstone shall use its best efforts to ensure the accuracy and
timely nature of all services performed, or required to be performed, under this
Agreement, but shall not be liable for any loss or damage, including counsel
fees, resulting from its actions or omissions to act or otherwise, in the
absence of its bad faith, willful misfeasance, negligence or reckless disregard
of its duties under this agreement. Sunstone shall not be liable in acting upon
any writing or document reasonably and in good faith believed by it to be
genuine and to have been signed or made by an Authorized Person or verbal
instructions which the individual receiving the instructions on behalf of
Sunstone reasonably believes in good faith to have been given by an Authorized
Person, and Sunstone shall not be held to have any notice of any change of
authority of any person until receipt of written notice thereof from the Trust
or such person.
2. Sunstone assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, errors, delay or any other loss whatsoever
caused by events beyond its reasonable control and that are not a result of
actions of Sunstone constituting its willful misfeasance, bad faith or
negligence. Sunstone will, however, take all reasonable steps to minimize
service interruptions for any period that such interruption continues beyond
Sunstone's control.
3. In no event and under no circumstances shall either party to this
agreement be liable to anyone, including, without limitation to the other party,
for consequential or punitive damages for any act or failure to act under any
provision of this Agreement even if advised of the possibility thereof.
4. At any time Sunstone may request instructions and/or receive
directions from an Authorized Person with respect to any matter arising in
connection with Sunstone's duties and obligations under this Agreement, and
Sunstone shall not be liable for any action taken or permitted by it in good
faith in accordance with such instructions or directions. Such request for
instructions by Sunstone may set forth any action proposed to be taken or
omitted by Sunstone with respect to its duties or obligations under this
Agreement and the date on and/or which such action shall be taken. Sunstone may
consult counsel of the Trust, at the expense of the Trust, and shall be fully
protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Trust.
5. Notwithstanding any of the provisions of this Agreement, Sunstone
shall be under no duty or obligation under this Agreement to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency
of the amount to be received therefor, or the authority of a Fund, as the case
may be, to request such sale or issuance;
(b) The legality of the declaration of any dividend by a Fund, or the
legality of the issue of any Shares in payment of any stock dividend, or the
legality of any recapitalization or readjustment of Shares.
C. INDEMNIFICATION.
1. The Trust on behalf of the Funds agrees to indemnify and hold
harmless Sunstone, its employees, agents, directors, officers and nominees from
and against any and all claims, demands, actions and suits, whether groundless
or otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Sunstone's actions taken or
non-actions with respect to the performance of services under this Agreement or
based, if applicable, upon reliance on information, records, instructions (oral
or written) or requests given or made to Sunstone by the Trust, its officers,
trustees, agents or representatives; provided that this indemnification shall
not apply to actions or omissions of Sunstone in cases of its own willful
misfeasance, bad faith, negligence or from reckless disregard by it of its
obligations and duties under this Agreement, and further provided that prior to
confessing any claim against it which may be the subject of this
indemnification, Sunstone shall give the trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
Sunstone. The indemnity and defense provisions provided hereunder shall
indefinitely survive the termination of this Agreement.
2. Sunstone shall indemnify and hold the Trust harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities which are the result of Sunstone's willful misfeasance,
bad faith, or negligence in the performance of its duties or obligations under
this Agreement.
ARTICLE VI
TERM
1. This Agreement shall remain in full force and effect until ________,
1997 (the "Initial Term"), and thereafter shall automatically extend for
additional, successive twelve (12) month terms unless earlier terminated as
provided below.
2. Either of the parties hereto may terminate this Agreement after the
Initial Term 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 receipt of such notice. In the event such notice is given with
respect to a Fund, it shall be followed promptly by a copy of a resolution of
the Board of Trustees of the Trust, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating the successor
transfer agent or transfer agents. In the event such notice is given by
Sunstone, the Trust shall on or before the termination date, deliver to Sunstone
a copy of a resolution of its Board of Trustees certified by the Secretary or
any Assistant Secretary designating a successor transfer agent or transfer
agents. In the absence of such designation by the Trust, the Trust shall upon
the date specified in the notice of termination of this Agreement and delivery
of the records maintained hereunder, be deemed to be its own transfer agent and
Sunstone shall thereby be relieved of all duties and responsibilities pursuant
to this Agreement. Fees and out-of-pocket expenses incurred by Sunstone, but
unpaid by a Fund upon such termination, shall be immediately due and payable
upon and notwithstanding such termination.
3. In the event this Agreement is terminated as provided herein,
Sunstone, upon the written request of the Trust, shall deliver the records of
the Trust to the Trust or its successor transfer agent in the form maintained by
Sunstone. The Trust shall be responsible to Sunstone for all out-of-pocket
expenses and for the reasonable costs and expenses associated with the
preparation and delivery of such media, including: (a) any custom programming
requested by the Trust in connection with the preparation of such media; (b)
transportation of forms and other materials used in connection with the
processing of Fund transactions by Sunstone; and (c) transportation of Trust
records and files in the possession of Sunstone. Sunstone shall not reduce the
level of service provided to the Trust following notice of termination by the
Trust or by Sunstone.
ARTICLE VII
MISCELLANEOUS
A. NOTICES. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust with respect to any Fund,
shall be sufficiently given if addressed to the Trust and mailed and delivered
to the President at 13100 Skyline Boulevard, Woodside, California, 94062, or at
such other place as the Trust may from time to time designate in writing. Any
notice or other instrument in writing, authorized or required by this Agreement
to be given to Sunstone shall be sufficiently given if addressed to Sunstone and
mailed or delivered to the President at 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202, or at such other place as Sunstone may from time to
time designate in writing.
B. AMENDMENTS/ASSIGNMENTS.
1. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement.
2. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not
be assignable by either party without the written consent of the other party
except that Sunstone may assign this Agreement to an affiliate with advance
written notice to the Trust.
C. WISCONSIN LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin. If any part, term or
provision of this Agreement is determined by the courts or any regulatory
authority having jurisdiction over the issue 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.
D. COUNTERPARTS. 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.
E. NOTICE OF DECLARATION OF TRUST. This Agreement is executed by or on
behalf of the Trust with respect to each of the Funds and the obligations
hereunder are not binding upon any of the Trustees, officers or shareholders of
the Trust individually but are binding only upon the Funds to which such
obligations pertain and the assets and property of such Funds. The Trust's
Certificate of Trust is on file with the Secretary of State of Delaware.
F. NON-EXCLUSIVE; OTHER AGREEMENTS. The services of Sunstone hereunder are
not deemed exclusive and Sunstone shall be free to render similar services to
others. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto and any
actions taken or omitted by any party hereunder shall not affect any rights or
obligations of any other party hereunder.
G. CAPTIONS. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
SUNSTONE INVESTOR SERVICES, LLC THE PURISIMA FUNDS
By: By:
------------------------------ --------------------------------
(Signature) (Signature)
------------------------------ --------------------------------
(Name) (Name)
------------------------------ --------------------------------
(Title) (Title)
------------------------------ --------------------------------
(Date Signed) (Date Signed)
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
THE PURISIMA FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
NAME OF FUND
------------
PURISIMA TOTAL RETURN FUND
Dated: ___________, 1996
SCHEDULE B
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
THE PURISIMA FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
SERVICES TO THE PURISIMA FUNDS
- -- MAINTENANCE OF SHAREHOLDER ACCOUNTS<F6>
- Maintain records for each shareholder account
- Scan account documents for electronic storage
- Issue customer statements
- Record changes to shareholder account information
- Maintain account documentation files for each shareholder
- Establish and maintain IRA accounts
- -- SHAREHOLDER SERVICING AND SHAREHOLDER TRANSACTIONS<F6>
- Respond to written and telephone (recorded lines) inquiries from
shareholders for information about their accounts
- Process shareholder purchase and redemption orders, including those of
automatic investment and systematic withdrawal plans
- Set up account information, including address, dividend options, taxpayer
identification numbers and wire instructions
- Issue transaction confirmations
- Process transfers and exchanges
- Process dividend payments by check, wire or ACH or purchase new shares
through dividend reinvestment
- Tax reporting
<F6> Includes money market accounts and transactions
- -- COMPLIANCE REPORTING AND PROXY PROCESSING
- Provide required reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the states in which each
fund is registered
- Prepare and distribute required Internal Revenue Service forms relating to
earned income and capital gains to fund and shareholders
- Issue tax withholding reports to the Internal Revenue Service
- Mail, process and tabulate proxies
- -- DEALER/LOAD PROCESSING (IF APPLICABLE)
- Provide dealer access through NSCC's FundSERV
- Provide reports for tracking Rights of Accumulation and purchases made
under Letters of Intent
- Account for separation of shareholder investments from transaction sale
charges for purchases of fund shares
- Calculate fees due under 12b-1 plans for distribution and marketing
expenses
- Track sales and commissions by dealer and provide for payment of
commissions on direct shareholder purchases in load funds
- -- TELEPHONE SERVICE REPRESENTATIVES ON-LINE ACCESS RESPONDING TO SHAREHOLDER OR
DEALER INQUIRIES RELATED TO:
- Account registration
- Share balances
- Account options
- Dividend and capital gain distribution status
- Withholding status
- Transaction dates and types;
- Shares traded
- Social security number/tax ID number
- External account number
- Address
- Customer or account type
- Dealer, branch and rep information
- Dollars available/not available in the account
- Shares purchased/redeemed today
- Dividend accrual, current dividend period; and
- Market value of shares
- -- STANDARD REPORTS
- Shareholder base analysis (monthly)
- New account listing (weekly)
- Purchases, redemptions, exchanges (monthly)
- Servicing summary (monthly)
- Commission and 12b-1 reports for load funds (monthly)
- -- OTHER AVAILABLE SERVICE FEATURES
In addition to the standard features listed above, Sunstone's system offers
additional features to meet specialized needs and are available at additional
costs.
- 12b-1 fee calculations
- LOI/ROA processing
- Asset allocation and re-allocation processing in real time
- Multiple account look-up options
- Cross-fund account queries
- Cross-account queries
- On-line transaction list
- Comprehensive reporting by various criteria
- Consolidated statements
- Duplicate statements to third parties
- Proxy generation and tabulation
- Broker-dealer reporting
- Remote system access
- Cross-fund dividend reinvestment
- User-defined transaction rules
- Fund-level processing options
- Systematic withdrawals
- Correspondence system capabilities
SCHEDULE C
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
THE PURISIMA FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
FEE SCHEDULE
- -- BASE FEES
ANNUAL
SHAREHOLDER MINIMUM ANNUAL
TYPE OF FUND ACCOUNT FEE FEE PER FUND
------------ ----------- --------------
Equity $20.00 $20,000
The base fee assumes a single class of shares, no load or 12b-1 plan;
availability of automatic investment plans and systematic withdrawal plans
(using Sunstone's regular processing date); quarterly or less frequent
dividend distributions for equity funds; annual capital gains
distributions; and includes all standard reports.
- -- ADDITIONAL FEES TO BE ADDED TO BASE FEE
TYPE OF SERVICE OR ANNUAL SHAREHOLDER MINIMUM ANNUAL
FUND FUNCTION ACCOUNT FEE FEE PER FUND
------------------ ------------------ --------------
Front-end load 1.50 2,000
CDSC or back-end load 2.00 3,000
12b-1 plan 1.00 1,000
Monthly dividends on
non-money market funds 2.00 2,000
Additional class of shares --- one-half minimum above
- -- MAINTENANCE OF NORTHERN MONEY MARKET FUNDS
An annual fee of $5,000 per Northern Money Market Fund used in
connection with your fund is allocated to the base fee. All account
maintenance and processing fees, out-of-pocket expenses and additional
fees apply to the Northern Money Market Fund shareholder accounts and
are billed to the Adviser.
- -- ONE-TIME SET-UP FEES
New Fund set-up (per fund) $2,000
NSCC FundSERV set-up (per fund group) 2,500
NSCC networking (per fund group) 1,500
Remote access set-up (per location) 500
Northern Money Market Funds (per fund) 1,500
Voice Response Unit (VRU) 2,000
- -- ACCOUNT MAINTENANCE AND PROCESSING FEES
(per occurrence)
Shareholder account set-up 2.00
AIP/SWP/Automatic Exchange account set-up 2.50
AIP/SWP/Automatic Exchange transaction processing .50
AIP/SWP/Automatic Exchange alternate date transaction processing 1.50
Omnibus account transaction 2.50
Transaction processing - FundSERV .20
Taxpayer ID number solicitation 1.50
Monthly remote access user charge
First user and password 150.00
Additional users and passwords (each) 100.00
VRU transactions .25
- -- OUT-OF-POCKET EXPENSES
Per check processing (dividend, capital gains, redemption) .25
Per statement and confirm processing .25
Per tax form processing .15
Per label printing for proxy or marketing purposes .05
Production of ad hoc reports 100 min.
Bulk mailings/insert handling charge
1 insert .25
2 - 3 inserts (per piece) .20
4 or more inserts (per piece) .15
Bank account service fees and any other bank charges At cost
Check stock At cost
Statement paper At cost
Envelopes At cost
Tax forms At cost
Postage and express delivery charges At cost
Telephone and long distance charges At cost
Fax charges At cost
P.O. box rental At cost
800-phone number At cost
Inventory and records storage At cost
FundSERV charges At cost
- -- ADDITIONAL FEES (WHICH MAY BE PASSED ON TO SHAREHOLDERS)
Outgoing wire fee Varies by bank
Telephone exchange fee $ 5.00
Non-sufficient funds Varies by bank
IRA/SEP processing
Annual maintenance or custodial fee (per account) 15.00
Account termination (transfer or rollover) 15.00
- -- CUSTOM PROGRAMMING
Additional fees may apply for special programming to meet your servicing
requirements or to create custom reports.
SCHEDULE D
TO THE
TRANSFER AGENCY AGREEMENT
BY AND BETWEEN
THE PURISIMA FUNDS
AND
SUNSTONE INVESTOR SERVICES, LLC
RECORDS MAINTAINED BY SUNSTONE
Account applications
Canceled certificates plus stock powers and supporting documents
Checks including check registers, reconciliation records, any adjustment
records and tax withholding documentation
Indemnity bonds for replacement of lost or missing stock certificates and
checks
Liquidation, redemption, withdrawal and transfer requests including stock
powers, signature guarantees and any supporting documentation
Shareholder correspondence
Shareholder transaction records
Share transaction history of the Funds
Such other records expressly required to be maintained by a transfer agent
pursuant to the Investment Company Act of 1940 or the Securities Exchange
Act of 1934.
- -------------
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
September 19, 1996, relating to the statement of assets and liabilities of The
Purisima Total Return Fund (comprising The Purisima Funds), 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. We also consent to the reference to us under the heading
"Independent Accountants" in such Statement of Additional Information and to
the reference to us under the heading "Transfer and Dividend Disbursing Agent,
Custodian and Certified Public Accountants" in such Prospectus.
/s/ Price Waterhouse
Price Waterhouse LLP
Milwaukee, Wisconsin
September 19, 1996
EXHIBIT 13.1
The Purisma Funds
13100 Skyline Boulevard
Woodside, California 94062-4547
Ladies and Gentlemen:
The undersigned hereby subscribes for the purchase of 10,000 shares of
beneficial interest (the "Shares") of The Purisima Total Return Fund (the
"Fund"), a separate series of The Purisima Funds (the "Trust"), at $10.00 per
share for a total investment of $100,000. In connection with said subscription,
the undersigned hereby represents that:
1. There is no present reason to anticipate any change in circumstances or
any other occasion or event which would cause the undersigned to sell or redeem
the Shares shortly after the purchase thereof.
2. There are no agreements or arrangements between the undersigned and the
Trust, or any of its officers, trustees, employees or the investment manager of
the Fund, or any affiliated persons thereof with respect to the resale, future
distribution or redemption of the Shares.
3. The sale of the Shares will only be made by redemption to the Fund and
not by a transfer to any third party without the consent of the Trust.
4. The undersigned is aware that in issuing and selling these Shares, the
Fund and the Trust are relying upon the aforementioned representations.
Dated: September 16, 1996
By: /s/ Kenneth L. Fisher
--------------------------------
Kenneth L. Fisher
EXHIBIT 13.2
ORGANIZATIONAL EXPENSES AGREEMENT
---------------------------------
The Purisima Funds, a Delaware business trust (the "Trust") and Kenneth L.
Fisher ("Fisher"), in consideration for the engagement by Fisher
Investments, Inc. as the investment adviser for the series of the Trust
designated the Purisima Total Return Fund (the "Fund") pursuant to a
separate agreement, hereby agree as follows:
1. ADVANCEMENT OF EXPENSES. Fisher shall pay all of the organizational
expenses of the Fund, including but not limited to initial fees for registration
of the shares of the Fund under applicable law and fees for services rendered
prior to the commencement of the initial public offering of shares of the Fund,
subject to the right to be reimbursed pursuant to paragraph 2.
2. REIMBURSEMENT AND AMORTIZATION OF EXPENSES. The Fund shall amortize the
organizational expenses over a period of 60 months beginning with the month in
which the Fund commences the initial public offering of shares of the Fund, and
the Fund shall reimburse Fisher during the period of such amortization.
3. LIMITATION ON REIMBURSEMENT. If the Fund liquidates during such 60-month
period prior to the complete amortization of all organizational expenses,
neither the Fund nor the Trust shall have any duty to reimburse Fisher for
organizational expenses unamortized as of the time of liquidation.
4. LIMITATION ON REDEMPTION OF INITIAL INVESTMENT. Fisher agrees that, in
the event that he or any transferee thereof redeems any percentage of his
initial investment in the Fund prior to the 60-month amortization period, the
Trust is authorized to reduce the redemption proceeds to cover any unamortized
organizational expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares outstanding at the time of
redemption. If, for any reason, said reduction of redemption proceeds is not in
fact made by the Trust in the event of such a redemption, Fisher agrees to
reimburse the Trust immediately for any unamortized organizational expenses in
the proportion stated above.
5. OBLIGATION OF THE TRUST. This agreement is executed by an officer of the
Trust on behalf of the Trust and not individually. The obligations of this
Agreement are binding only upon the assets and property of the Fund and the
Trust and not upon the trustees, officers or shareholders of the Trust
individually. The Agreement and Declaration of Trust under which the Trust was
organized and operates is on file with the Secretary of State of Delaware.
Dated:
-----------------
THE PURISIMA FUNDS KENNETH L. FISHER
("Trust") ("Fisher")
By: By:
------------------------------ --------------------------
EXHIBIT 14
PURISIMA FUNDS
IRA DISCLOSURE STATEMENT AND CUSTODIAL AGREEMENT
------------------------------------------------
Fisher Investments, Inc.
Investment Adviser
TABLE OF CONTENTS
- -----------------
DISCLOSURE STATEMENT 2
Power to Revoke 2
Legal Requirements with Respect to Your IRA 2
Tax Treatment of Contributions to Your IRA 3
Tax Treatment of Distributions from Your IRA 3
Tax Treatment of Your IRA 4
Limits on Contributions to Your Account 4
Spousal IRA 4
Rollover 5
Rollover Contributions and Tax-Free Transfers 5
Excess Contributions 6
Use of Your Account as Security for a Loan 6
Prohibited Transactions 7
Estate Taxation 7
Effect of Divorce 8
Withdrawals Prior to Age 59 1/2 8
Minimum Distributions Required
Starting at Age 70 1/2 9
Penalty Tax for Failure to Meet
Minimum Distribution Requirements 9
Excess Distribution Penalty 9
Designation of a Beneficiary or Beneficiaries 10
Distributions Following Death of Grantor 10
Investment of Account 11
Financial Guarantees and Projections 11
Trustee Not Liable 11
Termination of This Account 11
Duty to File Tax Returns 12
Internal Revenue Service Approval 12
Additional Information 12
CUSTODIAL AGREEMENT 13
Article I 13
Article II 13
Article III 14
Article IV 14
Article V 16
Article VI 16
Article VII 17
Article VIII 17
Section 1 - Investment of Account 17
Section 2 - Beneficiary Designations 19
Section 3 - Miscellaneous 21
SCHEDULE OF FEES 25
DISCLOSURE STATEMENT
- --------------------
POWER TO REVOKE. For a period of seven (7) days following the date on which you
enter into an IRA or Custodial Trust Agreement with UMB Bank, n.a. (i.e.
"UMB"), you have the right to revoke the Trust. To effect revocation, please
write or call The Purisima Funds, P.O. Box 731, Milwaukee, WI 53201 or 1-800-
871-2665. In the event notice is mailed, the postmark date (or date of
certification or registration, if sent by certified or registered mail) will be
deemed the date of delivery, provided that normal mailing procedures are
followed. If you revoke your account, you are entitled to a return of the entire
amount deposited to your account without reduction for any fees, expenses or
commissions and without any adjustment for any investment gain or loss.
LEGAL REQUIREMENTS WITH RESPECT TO YOUR IRA
Current tax law requires that your trust agreement be in writing and that it
contain the following provisions.
1. All contributions must be in the form of cash and cannot be in excess of the
lesser of your compensation or $2,000 per year, unless the contribution is a
rollover contribution as defined in the Internal Revenue Code. Employer
contributions to a Simplified Employee Pension plan may exceed the
limitations applicable to individuals.
2. The Trustee must be a bank such as UMB, or other institution (or person)
that has satisfied the Secretary of the Treasury that it is able to
administer your account in accordance with tax laws.
3. None of the funds of your account may be invested in life insurance
contracts.
4. Your interest in the balance of the account cannot be forfeited.
5. With the exception of investments in a common trust fund or common
investment fund such as a mutual fund, none of your account assets may be
commingled.
6. Distribution of your interest in the account must begin no later than the
April 1 next following the year in which you attain age 70 1/2. Any balance
in the account at that time must be distributed to you in a lump sum or
commence to be paid in a series of payments which do not exceed your life
expectancy or the joint and survivor life expectancies of yourself and your
designated beneficiary. However, you may increase withdrawals. If you should
die prior to receiving the entire account, the balance must be distributed
to your beneficiary in accordance with Treasury Department regulations
(unless the beneficiary is your spouse and elects to treat the account as
his or her own IRA).
TAX TREATMENT OF CONTRIBUTIONS TO YOUR IRA
Without regard to qualifying rollover contributions or to contributions made by
your employer to a Simplified Employee Pension plan, under present tax law you
are permitted to make an annual contribution to your account in any amount up to
the lesser of your compensation or $2,000. Such annual contributions may be made
anytime during the year (and up to your tax return due date for the taxable
year, not including extensions). If you are not covered by an employer-sponsored
retirement plan (e.g., a profit-sharing plan, ESOP, pension plan, etc.) and (if
you file a joint return) your spouse is not covered by such a plan, you may
deduct your full contribution. If you or your spouse (if a joint return is
filed) are covered by such a plan you may still be entitled to deduct either all
or a portion of your contribution, depending upon the amount of your Adjusted
Gross Income ("AGI"). If you are married and filing a joint return you may
deduct the full contribution if your AGI is under $40,000. If you are single the
full deduction is available if your AGI is under $25,000. No deduction at all is
available if you are married (if a joint return is filed) and your AGI is
$50,000 or more or if you are unmarried and your AGI is $35,000 or more.
(Special rules apply if you are married but you and your spouse are filing
separate returns.) If your AGI is above the amount where a full deduction
applies but less than the amount where no deduction is available a partial
deduction can be taken. The amount of the partial deduction can be approximately
determined by taking 20% of the difference between your AGI and the applicable
dollar amount ($25,000 if single; $40,000 if married) and subtracting the result
from $2,000. For example, assume an unmarried individual has AGI of $30,000 and
contributes $2,000 to his IRA. 20% of the difference between his AGI ($30,000)
and the applicable dollar amount ($25,000) is $1,000. $1,000 subtracted from
$2,000 is $1,000. Therefore, he is entitled to deduct $1,000 of his $2,000
contribution. He may, of course, limit his contribution to the amount deductible
if he wishes to do so. Even if your contribution is only partially deductible -
or not deductible at all - there is still a tax advantage for making it. As long
as contributions remain in your IRA they may grow and increase in value without
the braking effect of current taxation of earnings.
TAX TREATMENT OF DISTRIBUTIONS FROM YOUR IRA
Amounts distributed to you from the account (except for refunds of certain
excess contributions and non-deductible contributions which are discussed below)
will be taxable as ordinary income in the year received. The benefits of capital
gain treatment and 5-year and 10-year forward averaging (now being phased out)
which may apply to distributions from your employer's qualified plan, are not
available with respect to distributions from your account. Distributions of non-
deductible contributions are not taxable. If you have made non-deductible
contributions to an IRA, then distributions from the IRA will be excluded from
tax in the proportion that all non-deductible contributions to your IRAs bear to
the aggregate balances of all your IRAs at the end of the year of distribution.
All distributions are subject to federal income tax withholding requirements
unless the recipient elects not to have withholding apply by written notice to
the Trustee at the time such distribution is requested.
TAX TREATMENT OF YOUR IRA
The funds in your IRA are not subject to income tax until distributed to you.
The earnings accumulate on a tax-deferred basis to compound the growth of your
account.
LIMITS ON CONTRIBUTIONS TO YOUR ACCOUNT
Except in the case of a rollover contribution, during any year the maximum
contribution you can make is $2,000 or 100% of your compensation, whichever is
less. For purposes of determining the amount of your contributions,
"compensation" means wages, commissions, salaries, tips, professional fees,
bonuses and other amounts you receive for providing personal services. Alimony
is also treated as compensation which you may contribute to your IRA. No
contributions can be made in the year that you attain age 70 1/2 or subsequent
years.
SPOUSAL IRA
If your spouse is employed, he or she can establish his or her own IRA subject
to the same rules as are applicable to your IRA. If you file a joint return with
a spouse who either has no compensation for the taxable year or elects to be
treated as having none, the maximum contribution amount is the lesser of $2,250
or 100% of your compensation for the year. In such case the amount contributed
can be divided between your IRA and the spousal IRA in any manner you desire,
provided that no more than $2,000 can be contributed to either IRA. For example,
the $2,250 (or such lesser amount as you contribute) can be divided equally
between the two IRAs or $2,000 may be contributed to one and $250 to the other.
No contributions may be made to a spousal IRA during or after the year in which
he or she reaches age 70 1/2. However, if you are ineligible to make
contributions to your own IRA because of age, you may (if you have sufficient
compensation) nevertheless make contributions of up to $2,000 to an IRA for your
non-working spouse if he or she has not reached age 70 1/2.
ROLLOVER
If your account represents a rollover from a pension or profit-sharing plan
qualified under Section 401(a) of the Internal Revenue Code, you should not make
non-rollover additional contributions to the same account if you desire to
preserve its eligibility for future rollover to another qualified plan.
Similarly, if your account represents a rollover from a Section 403(b) annuity
or custodial account, you should not make non-rollover additional contributions
to the same account if you desire to preserve its eligibility for future
rollover to another Section 403(b) annuity or custodial account. A rollover IRA
is eligible to accept future rollover contributions. In addition, you may
establish another IRA to which non-rollover annual cash contributions may be
made.
ROLLOVER CONTRIBUTIONS AND TAX-FREE TRANSFERS
A rollover contribution is a contribution to your IRA of cash and/or property
other than cash which you received as a distribution from another IRA or as a
qualified distribution from a Section 403(b) annuity, or a qualified employer-
sponsored retirement plan, such as a profit-sharing plan, 401(k) plan, an ESOP,
etc. In the case of a tax-free transfer, the transfer is made directly between
the fiduciaries, that is the trustees, custodian, etc. of the IRAs and/or the
qualified plan, as the case may be. If you receive a distribution from another
IRA you may make a tax-free rollover contribution of all or part of the assets
you receive to your UMB IRA, provided that you complete the rollover within 60
days of the date you receive the distribution. You may make only one such
rollover during any 12-month period. A direct transfer from the trustee or
custodian of another IRA to your UMB IRA may be made without regard to the 12-
month limitation applicable to IRA rollovers.
If you receive a distribution from your employer's qualified retirement
plan, or a Section 403(b) annuity, you may be eligible to make a rollover
contribution to your UMB IRA of all or part of the distribution, less the amount
of any non-deductible contributions to the plan. Most distributions, with the
notable exception of installments paid over a ten or more year period, are
eligible for rollover. The rollover contribution must be made within 60 days of
the date you receive the distribution. If the distribution included property
other than cash, the property itself (or the proceeds from its sale) must be
included in the rollover contribution to the extent possible, before any cash
received in the distribution may be included.
In order to avoid 20% federal income tax withholding on the amount
distributed from the qualified retirement plan or Section 403(b) annuity, you
should direct that the distribution be transferred to your UMB IRA in a "direct
rollover.' You should receive information about the "direct rollover" option
from your plan administrator prior to distribution of your account.
You may not roll over any minimum distribution amounts you are required to
receive after age 70 1/2.
EXCESS CONTRIBUTIONS
An excess contribution is any contribution amount which exceeds your
contribution limit, excluding rollover and direct transfer amounts. In addition,
any contributions that are made to an IRA for the year in which the IRA owner
reaches age 70 1/2, or for any later year, are considered excess contributions.
If excess contributions are made to your account in any year and the excess
(including income attributed to that excess) is withdrawn prior to the due date
for your tax return for that year (including extensions), no penalty tax will be
imposed on the amount contributed. Income attributed to such excess
contributions refunded is taxable, and is also subject to a 10% additional
income tax unless you are older than age 59 1/2 or are disabled.
If the withdrawal of excess contributions occurs after the due date for your
tax return (including extensions), a 6% cumulative penalty tax will be imposed
on the excess. A further 10% additional income tax will be imposed upon the
withdrawn excess amount if a deduction was allowed for the excess contribution
and the total contributions for the year exceeded the maximum deductible amount,
unless you have reached age 59 1/2 or are disabled by the time of the
withdrawal. If excess contributions have been made, you can correct the
situation by reducing your contributions in subsequent years. Excess
contributions left in the account and applied to a later tax year's
contributions are still subject to the 6% penalty tax and will continue to
remain so until the excess has been corrected.
USE OF YOUR ACCOUNT AS SECURITY FOR A LOAN
You may not pledge any part of your account as security for a loan. If you use
all or any part of your account as security for a loan, the portion used for
that purpose is treated as though it were distributed to you and you must
include that amount in your gross income for the year in which that transaction
takes place. If the pledge occurs prior to your attaining age 59 1/2, an
additional income tax equal to 10% of the amount included in your taxable income
is added to your tax liability.
PROHIBITED TRANSACTIONS
Tax laws also prohibit certain other transactions between a "Disqualified
Person' and your account. A "Disqualified Person" includes UMB, you, a
beneficiary of your account, members of your family or of a beneficiary's family
or any business or trust in which a controlling interest is held by any of these
individuals. The prohibited transactions are as follows:
1. sale or exchange or leasing of property between your account and a
Disqualified Person;
2. lending of money or other extension of credit between your account and a
Disqualified Person;
3. furnishing of goods, services or facilities between your account and a
Disqualified Person;
4. transfer to or use by or for the benefit of a Disqualified Person of the
income or assets of your account;
5. any act by a Disqualified Person who is a fiduciary whereby he or she deals
with the income or assets of your account in his or her own interest or for
his or her own account; or
6. receipt of any consideration for his or her own personal account by any
Disqualified Person who is a fiduciary from any party dealing with your
account in connection with a transaction involving the income or assets of
the account.
If either you or your beneficiary engages in a prohibited transaction, your
IRA will lose its tax exemption, and its full value will be added to your other
taxable income for the year in which the transaction takes place. If any of
these transactions occur prior to your attaining age 59 1/2, an additional
income tax equal to 10% of the amount included in your taxable income is added
to your tax liability.
ESTATE TAXATION
If there is a balance in your account at the time of your death, that balance
will be included in your estate for federal estate tax purposes. Your estate
will have to pay an additional 15% federal estate tax on any excess retirement
accumulation at your death. An excess retirement accumulation exists if, at the
time of your death, the value of all your interests in qualified plans, tax-
sheltered annuities and IRAs exceeds the present value of an annuity with annual
payments of $155,000 (adjusted periodically for inflation) payable over your
life expectancy immediately before your death. An exception to the excess
retirement accumulations tax may apply if your spouse is the designated
beneficiary. Please consult your tax adviser.
EFFECT OF DIVORCE
The general rule is that the Grantor will be liable for income tax and any
penalties on any amount distributed from his or her IRA to meet the obligation
specified in a divorce decree. The transfer may be structured so as to avoid
taxation to the Grantor if the requirements of Code Section 408(d)(6) are met.
Those requirements are:
1. a written court order clearly specifying the amount to be transferred into
an IRA of the spouse or former spouse, and
2. (a) a direct transfer of the funds to the IRA of the spouse or former
spouse;
(b) changing the name on the IRA from your name to the name of your spouse
or former spouse; or
(c) moving a rollover of IRA assets from your IRA to your spouse or former
spouse.
WITHDRAWALS PRIOR TO AGE 59 1/2
You may make withdrawals from your IRA at any time. However, amounts withdrawn
(except for the return of non-deductible contributions) are includible in your
taxable income for the year of withdrawal. If you have not yet reached age 59
1/2 when a withdrawal is made, 10% additional income tax must be paid on the
amount withdrawn. After age 59 1/2 you may make such withdrawals as you wish,
free of any penalty tax. Until you reach age 70 1/2 you are not required to make
a withdrawal. A withdrawal from your IRA before you reach age 59 1/2 will not be
subject to the penalty tax if it is made on account of your permanent and total
disability, death, a qualifying rollover, a direct transfer, the timely
withdrawal of an excess contribution or if the distribution is a part of a
series of substantially equal periodic payments (at least annually) made over
your life expectancy or the joint life expectancies of you and your beneficiary.
MINIMUM DISTRIBUTIONS REQUIRED STARTING AT AGE 70 1/2
You must begin withdrawals from your IRA by April 1 of the year following the
year in which you reach age 70 1/2. With respect to the year during which age 70
1/2 is reached and each subsequent year you must withdraw at least an amount
sufficient to cause the entire balance of your IRA to be distributed over your
remaining life expectancy or the joint life expectancies of you and your
designated beneficiary, determined by actuarial tables. If you elect to receive
your first required distribution between January 1 and April 1 following the
year in which you reach age 70 1/2, you must receive a second required
distribution prior to the end of that year.
You may choose (within the limits set forth in the IRS distribution rules)
how you want your required minimum distributions structured. You must make your
payment election no later than April 1 following your 70 1/2 year. If you do not
make an election by that date, we will determine your required minimum
distribution each year based on your single life expectancy (if a beneficiary is
not named) or joint life expectancies (if there is a designated beneficiary) -
and pay those distributions to you. For this purpose, all life expectancies,
except that of a non-spouse beneficiary, will be recalculated.
If you name someone other than your spouse as your beneficiary, and your
beneficiary is more than 10 years younger than you, your required minimum
distributions must satisfy the Minimum Distribution Incidental Benefit rule
(which calculates your distributions as if your beneficiary were exactly 10
years younger than you).
PENALTY TAX FOR FAILURE TO MEET MINIMUM DISTRIBUTION REQUIREMENTS
If the amount distributed to you with respect to any year in which you are at
least age 70 1/2 is less than the minimum required distribution, a penalty tax
of 50% of the difference between the actual distribution and the minimum
required distributions will be imposed.
EXCESS DISTRIBUTION PENALTY
You will be taxed an additional 15% on any amount received and included in your
income during a calendar year from qualified retirement plans, tax-sheltered
annuities and IRAs which exceeds $155,000 (adjusted periodically for inflation).
Certain exceptions may apply. Consult your tax adviser if you receive an excess
distribution.
DESIGNATION OF A BENEFICIARY OR BENEFICIARIES
You have the right to designate one or more beneficiaries to whom your account,
or any undistributed portion thereof, is to be paid in the event of your death.
You may also at any time revoke a prior beneficiary designation and, if desired,
designate different individuals as beneficiaries.
You may designate your beneficiary(ies) on the IRA Application, or in a form
acceptable to the Trustee. Write or call The Purisima Funds, P.O. Box 731,
Milwaukee, WI 53201 (Telephone 1-800-871-2665).
In the absence of a valid beneficiary designation, the Trustee will make
distribution of any death benefit to your surviving legal spouse; but, if none,
then to your surviving natural and adoptive children in equal shares, but if
none, then to your personal representative. Notwithstanding the foregoing
sentence, the Trustee may, in any case where reasonable doubt exists as to the
proper course of action, request instructions from a court of competent
jurisdiction. All costs and expenses (including time expended by the Trustee) in
such cases will be charged against your account.
DISTRIBUTIONS FOLLOWING DEATH OF GRANTOR
As a general rule, the entire balance of the IRA must be distributed to
beneficiaries by December 31 of the year in which the 5th anniversary of the
Grantor's death falls. If this rule is violated, a penalty tax equal to 50% of
the undistributed balance will be imposed. There are three exceptions to the
general rule: (1) If the Grantor's designated beneficiary is the surviving
spouse of the Grantor, such spouse may elect to treat the Grantor's IRA as his
or her own IRA. In that case the 5-year limitation will not apply. (2) Where
installment payments have commenced over the life expectancies of the Grantor
and designated beneficiary before the Grantor's death then payments will
continue to the surviving beneficiary at a rate at least as rapidly as in effect
at the time of the Grantor's death, and the 5-year limitation does not apply. In
such case, the surviving beneficiary has the same right to designate
beneficiaries as the Grantor had while living. (The 5-year limitation will apply
to distributions to any such second-level beneficiaries.) (3) If the Grantor
dies before his or her required beginning date and the designated beneficiary
elects that the account balance be distributed in substantially equal payments
over his or her life expectancy, the beneficiary must make this election and
commence distributions by December 31 of the year following the year of the
Grantor's death (distributions need not commence for a surviving spouse
beneficiary until December 31 of the year the Grantor would have attained age 70
1/2).
TRUSTEE TO ASSUME GRANTOR IS CALENDAR YEAR TAXPAYER UNLESS OTHERWISE INFORMED
Unless and until specifically notified that you make your federal income tax
returns on another basis, the Trustee will assume for all purposes, including
the preparation and furnishing of accounting statements, reports, etc., that
such tax returns are made on the basis of calendar years.
TRUSTEE NOT LEGAL ADVISER OR TAX COUNSELOR - GRANTOR SHOULD CONSULT OWN ADVISER
UMB expressly disclaims any right, duty, authority or responsibility to furnish
legal or tax advice respecting any matter or matters concerning or relating to
your account including present or future federal income tax consequences to you
or others which may arise or result from the establishment or maintenance of
your account, the selection of payment options, beneficiaries, and any other
matter whatsoever. You are advised and encouraged to consult with professional
counsel of your own selection respecting all such matters.
INVESTMENT OF ACCOUNT
Your account may be invested only in accordance with your direction in the The
Purisima Funds or any other mutual fund designated by Purisima as a permissible
investment alternative. None of the funds held in your account may be used to
purchase life insurance.
FINANCIAL GUARANTEES AND PROJECTIONS
The value of your account at any point in time will, of course, depend upon the
then current market value of the investments, retained investment earnings, if
any, etc. No guarantees or projections of any nature concerning earnings rates
or future security values are made.
TRUSTEE NOT LIABLE
The Trustee has no responsibility or liability for any losses or expenses
relating to any investment or to the sale or exchange of any asset of your
account.
TERMINATION OF THIS ACCOUNT
The Trustee may resign at any time upon 60 days' notice in writing to you, and
may be removed by you at any time upon 60 days' written notice. In either such
event you must appoint a qualified successor trustee or qualified custodian to
whom the Trustee, upon receipt of written acceptance of the appointment, shall
transfer the assets (less any amounts deemed necessary for payment of fees,
costs or expenses) and records of your account.
DUTY TO FILE TAX RETURNS
In any year in which you incur liability for a penalty tax by reason of making
excess contributions, by making early withdrawals (premature distributions), or
by failure to withdraw the minimum amount from your account, you are obligated
to file Internal Revenue Service Form 5329 "Return for Individual Retirement
Arrangement Taxes' with your Form 1040 at the time it is filed. Deductible
contributions in any year are reported on your Form 1040. Non-deductible
contributions must be reported on Form 8606.
INTERNAL REVENUE SERVICE APPROVAL
The Individual Retirement Trust Agreement is comprised of eight articles. The
first seven articles constitute Internal Revenue Service Form 5305 (REV.
OCTOBER, 1992) "Individual Retirement Trust Account." Under Treasury
Department regulations prototype trusts which use the provisions of this Form
are considered to meet the requirements of the Internal Revenue Code. The
addition of Article VIII by UMB does not negate the approval status of the
prototype. The Individual Retirement Trust Agreement, on IRS Form 5305, has been
approved as to form by the Internal Revenue Service. However, in approving the
form, the IRS does not consider the investment merits of the program.
ADDITIONAL INFORMATION
Additional information about individual retirement accounts is contained in IRS
Publication 590, which can be obtained from the office of the District Director
of Internal Revenue.
CUSTODIAL AGREEMENT
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This Agreement is made between UMB Bank, n.a., as trustee or its successor
(hereinafter referred to as "Trustee") and the individual whose name appears
on the IRA Application or other Adoption Agreement (hereinafter referred to as
"Grantor"). If the Grantor has previously adopted this Individual Retirement
Trust Account ("IRA") in any earlier form, by signature to the IRA
Application, he or she adopts the amended IRA in the form as hereby restated.
The Grantor is establishing (or adopting an amendment to) an individual
retirement account (under Section 408(a) of the Internal Revenue Code) to
provide for his or her retirement, and for the support of his or her
beneficiaries after death. The Trustee has given the Grantor the disclosure
statement required under the Income Tax Regulations under Section 408(i) of the
Code. Unless this Agreement is adopted for an existing IRA, the Grantor has made
an initial cash contribution to the IRA concurrently with the execution of the
IRA Application or other Adoption Agreement. The Grantor and Trustee make the
following agreement:
ARTICLE I
The Trustee may accept additional cash contributions on behalf of the Grantor
for a tax year of the Grantor. The total cash contributions are limited to
$2,000 for the tax year unless the contribution is a rollover contribution
described in Section 402(c) (but only after December 31, 1992), 403(a)(4),
403(b)(8), or 408(d)(3) of the Code or an employer contribution to a Simplified
Employee Pension plan as described in Section 408(k). Roll over contributions
before January 1, 1993 include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), or 408(d)(3) of the Code or an
employer contribution to a Simplified Employee Pension plan as described in
Section 408(k).
ARTICLE II
The Grantor's interest in the balance of the trust account is nonforfeitable.
ARTICLE III
1. No part of the trust funds may be invested in life insurance contracts; nor
may the assets of the trust account be commingled with other property except
in a common trust fund or a common investment fund (within the meaning of
Section 408(a)(5) of the Code).
2. No part of the trust funds may be invested in collectibles (within the
meaning of Section 408(m) of the Code), except as otherwise permitted by
Section 408(m)(3) which provides an exception for certain gold and silver
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Grantor's interest in the trust account shall be made in
accordance with the following requirements and shall otherwise comply with
Section 408(a)(6) and Proposed Regulations Section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations Section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Grantor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Grantor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a non-spouse beneficiary may not be recalculated.
3. The Grantor's entire interest in the trust account must be, or begin to be,
distributed by the Grantor's required beginning date, the April 1 following
the calendar year in which the Grantor reaches age 70 1/2. By that date, the
Grantor may elect, in a manner acceptable to the Trustee, to have the
balance in the trust account distributed in:
(a) a single sum payment.
(b) an annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Grantor.
(c) an annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Grantor and his or her designated beneficiary.
(d) equal or substantially equal annual payments over a specified period
that may not be longer than the Grantor's life expectancy.
(e) equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Grantor and his or her designated beneficiary.
4. If the Grantor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows:
(a) If the Grantor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Grantor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Grantor, or if the Grantor has not so elected, at the election of the
beneficiary or beneficiaries, either
(i) be distributed by December 31 of the year containing the fifth
anniversary of the Grantor's death, or
(ii) be distributed in equal or substantially equal payments over the
life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the
Grantor's death. If, however, the beneficiary is the Grantor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Grantor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Grantor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Grantor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment of each year,
divide the Grantor's entire interest in the trust as of the close of
business on December 31 of the preceding year by the life expectancy of the
Grantor (or the joint life and last survivor expectancy of the Grantor and
the Grantor's designated beneficiary, or the life expectancy of the
designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the Grantor and
designated beneficiary as of their birthdays in the year the Grantor reaches
age 70 1/2. In the case of distribution in accordance with paragraph
4(b)(ii), determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternate method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement of
another.
ARTICLE V
1. The Grantor agrees to provide the Trustee with information necessary for the
Trustee to prepare any reports required under Section 408(i) of the Code and
Regulations Sections 1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Grantor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) of the Code and
related regulations will be invalid.
ARTICLE VII
This agreement will be amended, from time to time, to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
SECTION 1 - INVESTMENT OF ACCOUNT
1. The Grantor has the sole authority and discretion, fully and completely, to
select and to direct the investment of all assets in the trust account, but
only in the The Purisima Funds portfolios or any other mutual fund
designated by Purisima as a permissible investment alternative.
2. Subject to the right and duty of the Grantor to direct the investments of
his or her trust account, the Trustee shall have full authority and power:
(a) to invest and reinvest the trust account in such Mutual Funds as
described in paragraph 1 of this article;
(b) to sell, assign, exchange, convey, or otherwise transfer any part or
all of the securities or other property of the trust account, upon such
terms and conditions as the Grantor shall direct, and no person dealing
with the Trustee shall be bound to see to the application of the
purchase money or inquire into the validity, expediency, or propriety
of such transaction;
(c) to sue or defend any suit or legal proceeding by or against the trust
account and to compromise, settle, submit to arbitration, or adjust any
suit or legal proceeding, claim, debt, damage, or undertaking due or
owing from or to the trust account but the Trustee shall not be
obligated to take any action which would subject it to expense or
liability unless it be first indemnified in an amount and manner
satisfactory to it or be furnished with funds sufficient, in its sole
judgment, to cover the same;
d) to acquire and hold any securities or other property of the trust
account without disclosing its fiduciary capacity, or in the name of
any other person, with or without a power of attorney for transfer
thereto attached;
(e) to employ attorneys, accountants, and others as it may deem advisable
for the best interest of the trust account, and to pay their reasonable
expenses and compensation out of the trust account;
(f) to make, execute and deliver, as Trustee, any and all instruments in
writing necessary or proper for the effective exercise of any of the
Trustee's powers as stated herein or otherwise necessary to accomplish
the purpose of the trust account.
3. The following shall constitute charges upon the trust account and shall be
paid by the Trustee out of the trust account unless, and to the extent, paid
by the Grantor:
(a) all taxes of whatever kind or character that may be imposed, levied or
assessed under existing or future laws upon or in respect of the trust
account, or upon the Trustee in its capacity as such, or upon the
assets or income of the trust account;
(b) all expenses incurred by the Trustee in the performance of its duties
hereunder, including the fees of attorneys, accountants and other
persons engaged by the Trustee for services in connection with the
trust account; and
(c) the fees and other compensation of the Trustee for its services
hereunder in the amounts agreed upon from time to time by the Grantor
and Trustee.
4. The Grantor shall not borrow any money from the trust account nor pledge any
part thereof as security for a loan. Furthermore, neither the Grantor nor
the Trustee shall engage, either directly or indirectly, in any of the
following transactions:
(a) the sale or exchange, or leasing, of any property between the trust
account and a Disqualified Person;
(b) the lending of money or other extension of credit between the trust
account and a Disqualified Person;
(c) the furnishings of goods, services or facilities between the trust
account and a Disqualified Person;
(d) the transfer to, or use by or for the benefit of, a Disqualified Person
of the income or assets of the Trust Account;
(e) an act by a Disqualified Person who is a fiduciary whereby he or she
deals with the income or assets of the trust account in his or her own
interest or for his or her own account; or
(f) receipt of any consideration for his or her own personal account by any
Disqualified Person who is a fiduciary from any party dealing with the
trust account in connection with a transaction involving the income or
assets of the trust account.
For purposes of this paragraph, "Disqualified Person" shall have the
meaning ascribed to that term under Section 4975(e)(2) of the Code.
SECTION 2 - BENEFICIARY DESIGNATIONS
1. At any time and from time to time the Grantor shall have the right to
designate one or more beneficiaries to whom distribution of his or her trust
account, or the previously undistributed portion thereof, shall be made in
the event of his or her death prior to the complete distribution of his or
her trust account. This right shall extend to the Grantor's surviving spouse
in the event he or she dies while receiving distributions under the
provisions of Sections 3(e) or 4(b) of Article IV. Any such beneficiary
designation shall be deemed legally valid only when submitted fully
complete, duly executed, and on a form provided by or acceptable to the
Trustee. Subject to the foregoing sentence, any such beneficiary designation
shall be effective upon receipt by the Trustee. Any such beneficiary
designation may be revoked by the Grantor at any time, and shall be
automatically revoked upon receipt by the Trustee of a subsequent
beneficiary designation or beneficiary designations in valid form bearing a
later execution date.
2. In the absence of a valid beneficiary designation on file with the Trustee
at the time of the Grantor's death, the Trustee shall, upon receipt of
notice of the death of the Grantor supported by a certified copy of the
death certificate or other appropriate evidence of the fact of death
satisfactory to the Trustee, make distribution of the Grantor's trust
account to the beneficiary or beneficiaries of the Grantor in the following
order of preference:
(a) to the Grantor's legal spouse; but if no such legal spouse shall
survive the Grantor, then to
(b) the surviving natural and adoptive children of the Grantor in equal
shares per capita and not per stirpes; but if there shall be no such
surviving child or children then to
(c) the personal representative of the Grantor, provided, however, that the
Trustee shall have no duty, obligation, or responsibility to make any
inquiry or conduct any investigation concerning the identification,
address, or legal status of any individual or individuals alleging the
status of beneficiary (designated or otherwise) nor to make inquiry or
investigation concerning the possible existence of any beneficiary not
reported to the Trustee within a reasonable period after the
notification of the Grantor's death (or that of his or her surviving
spouse) and previous to the distribution of the trust account. The
Trustee may conclusively rely upon the veracity and accuracy of all
matters reported to it by any source ordinarily presumed to be
knowledgeable respecting the matters so reported. With respect to any
distribution made by reason of the death of the Grantor (or his or her
surviving spouse) the Trustee shall have no higher duty than the
exercise of good faith, shall incur no liability by reason of any
action taken in reliance upon erroneous, inaccurate or fraudulent
information reported by any source assumed to be reliable, or by reason
of incomplete information in its possession at the time of such
distribution. Upon full and complete distribution of the trust account
pursuant to the provisions of this Section, the Trustee shall be fully
and forever discharged from all liability respecting such trust
account.
3. Any distribution pursuant to the provisions of this Section may be made in
cash or in kind or partly in both, at the sole discretion of the Trustee,
and shall be made within 30 days following receipt by the Trustee of
information deemed by it sufficient upon which to base such distribution;
provided, however, that the Trustee shall incur no liability respecting
fluctuations in the value of the trust account in the event of a delay
occasioned by Trustee's good faith decision to await additional evidence or
information bearing on the beneficiary or beneficiaries.
4. Whenever any distribution hereunder is payable to a minor or to a person
known by the Trustee to be under a legal disability, the Trustee in its
absolute discretion may make all or any part of such distribution to (a) a
legal guardian or conservator for such person, (b) a custodian under the
Uniform Transfers to Minors Act, (c) a parent of such person, or (d) such
person directly.
5. Anything to the contrary herein notwithstanding, in the event of reasonable
doubt respecting the proper course of action to be taken, the Trustee may in
its sole and absolute discretion resolve such doubt by judicial
determination which shall be binding on all parties claiming any interest in
the trust account. In such event all court costs, legal expenses, reasonable
compensation for the time expended by the Trustee in the performance of its
duties, and other appropriate and pertinent expenses and costs, shall be
collected by the Trustee from the trust account.
SECTION 3 - MISCELLANEOUS
1. The Trustee may make further amendments to this Agreement, in order to make
said Agreement acceptable in form to the Secretary of the Treasury and the
Secretary of Labor, or for any other purpose. Any such amendments shall be
effective without the signature of the Grantor to a new Adoption Agreement
or IRA Application and shall, if for the purpose of initially qualifying the
trust account pursuant to the Code, be retroactively effective to the date
of the captioned Agreement. The Trustee will mail a copy of any such
amendment to the Grantor.
2. The Trustee shall deliver, or cause to be executed and delivered, to the
Grantor all proxies, prospectuses and notices pertaining to securities held
in the account. The Trustee shall not vote any such securities except
pursuant to written instructions from the Grantor. Any notice sent from the
Trustee to the Grantor shall be effective, if sent by mail to the Grantor's
last address of record.
3. The Trustee, within 30 days after the close of each calendar year, shall
provide the Grantor a record of activity in the trust account during such
year, including the date and the dollar amount of contributions, any
earnings on such contributions, the date and dollar amount of any
distributions, a beginning balance and an ending balance. The Trustee may
meet its recordkeeping and reporting requirements by adopting the records of
any investment facility permitted by this Agreement, and it may delegate
ministerial duties of keeping such records to such facilities or their
managers.
4. Confirmation of transactions and records or statements of activity in the
Grantor's account shall be conclusive if the Grantor does not object within
ten days after mailing to the Grantor. In such case, the Trustee and its
officers and employees shall be forever released and discharged from any
liability with respect to any claim arising out of any action or omission
reflected on such confirmation or record.
5. The Trustee does not guarantee the trust account from loss or depreciation.
The liability of the Trustee to make any payment from the trust account at
any time is limited to the then available assets of the trust account.
6. Subject to the limitations contained in paragraph 1 of Section 1 of this
Article VIII, the Grantor shall have the sole power, right and duty to
direct the Trustee from time-to-time with respect to the investment and
reinvestment of the assets of the trust account. The Trustee shall comply
promptly with all such directions, providing such directions are clearly
stated in writing executed by the Grantor, and in form acceptable to the
Trustee. The Trustee shall not have any duty to inquire into the propriety
of any such direction nor into its effect upon the trust account or the
beneficiary or beneficiaries thereof, nor to apply to a court for
instructions notwithstanding the fact that the Trustee has, or with
reasonable inquiry should have, actual or constructive notice that any
action taken or omitted pursuant to, or as a result of, the exercise of such
directive power constitutes, or may constitute, a breach of the terms of the
trust account or a violation of any law applicable to the investment of the
funds held hereunder. Any such direction so given the Trustee shall be
deemed to be continuing until revoked or modified by a subsequent direction
in writing, notwithstanding the occurrence of any event or other development
of which the Trustee has or should have knowledge. The Trustee shall not be
liable or responsible for any loss resulting to the trust account or to any
present or future beneficiary thereof by reason of:
(a) any sale or investment made or other action taken pursuant to and in
accordance with the direction of the Grantor; or
(b) the retention of any asset, including cash, the acquisition or
retention of which has been directed by the Grantor.
7. This Agreement shall be binding upon all persons entitled to benefits under
the trust account, their respective heirs and legal representative, and upon
the Trustee and its successors.
8. Words used in the masculine shall apply to the feminine where applicable,
and wherever the context of the Agreement dictates, the plural shall be read
as the singular and the singular as the plural.
9. As the context requires, the term "Grantor" shall be deemed to include any
beneficiary of this Account following the death of the Grantor.
10. All questions arising with respect to the provisions of this Agreement
shall be determined by application of the laws of the State of Missouri
except to the extent federal statutes supersede Missouri law. To the extent
permitted by law, none of the creditors of the Grantor or any beneficiary
shall have any power to execute any levy, lien, assignment, garnishment,
alienation, attachment, or other voluntary or involuntary transfer on any of
the assets of the IRA; and all sums payable to the Grantor or any
beneficiary shall be free and clear of all liabilities for debts, levies,
attachments and proceedings of any kind, at law or in equity.
11. The Trustee shall receive reasonable annual compensation as may be agreed
upon from time to time between the Grantor and Trustee. The Trustee shall
pay all expenses reasonably incurred by it in its administration from the
trust account unless the Grantor pays the expenses.
12. The Trustee may resign at any time for any reason, including but not limited
to, the determination in the Trustee's sole discretion that the account
cannot be managed on a profitable basis, upon 60 days' notice in writing to
the Grantor and may be removed by the Grantor at any time upon 60 days'
notice in writing to the Trustee. Upon such resignation or removal, the
Grantor shall appoint a successor Trustee, which successor shall be a bank
or other qualified person as required by the Internal Revenue Code so as to
permit the trust account to continue as qualified under the Internal Revenue
Code. Upon receipt by the Trustee of written acceptance of such appointment
by the successor Trustee, the Trustee shall transfer and pay over to such
successor Trustee the assets of the trust account and all records pertaining
thereto. The Trustee is authorized, however, to retain from the assets of
the trust account such amounts as it may deem advisable for payment of all
its fees, compensation, costs and expenses, or for payment of any other
liabilities constituting a charge on or against the assets of the trust
account or on or against the Trustee, with any balance of such reserve
remaining after the payment of all such items to be paid over to the
successor Trustee. The successor Trustee shall hold the assets paid over to
it under terms similar to those of this Agreement that qualify under the
Internal Revenue Code. If, within 60 days after the Trustee's resignation or
removal, the Grantor has not appointed a successor Trustee, which has
accepted such appointment, the Trustee may pay the Grantor's interest to the
Grantor.
13. The Trustee shall not be responsible for determining the permissible amount
of contributions to the account, or for the amount or timing of
distributions from the account, or for any other actions taken at the
request of the Grantor. The Grantor shall indemnify and hold the Trustee
harmless from any and all liability, claims and expenses arising from any
actions taken at the Grantor's request or in connection with this Agreement,
except for any liability, claims, or expenses caused by the negligence of
the Trustee.
14. The Grantor agrees to pay to the Trustee fees for services performed under
this Agreement in an amount specified from time to time by the Trustee. Such
fees may include, but are not limited to, a fee to establish the Custodial
Account and the annual maintenance fee. The Trustee shall have the right to
change such fees at any time without prior written notice to the Grantor. As
soon as practicable after any change in fees, the Trustee shall make
available to the Grantor a new fee schedule. All fees may be billed to the
Grantor or deducted from the Custodial Account, at the discretion of the
Grantor. The Trustee shall also be entitled to reimbursement for all
reasonable and necessary costs, expenses and disbursements incurred by it in
the performance of services. Such fees and reimbursement shall be paid from
the Account if not paid directly by the Grantor and shall constitute a lien
upon the Account until paid.
For Fund information, prices, literature, account balances
and other information about your Purisima Funds account,
call 1-800-871-2665.
THE PURISIMA FUNDS
P.O. Box 731
Milwaukee, WI 53201
EXHIBIT 15
SERVICE AND
DISTRIBUTION PLAN
OF
THE PURISIMA FUNDS
WHEREAS, The Purisima Funds (the "Trust") engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust's Board of Trustees (the "Board") has established a
separate series of shares of the Trust and hereafter may establish additional
series of shares (each a "Fund," and collectively, the "Funds");
WHEREAS, the Trust proposes or may propose to commence an offering of
shares of the Funds at net asset value without an initial or contingent deferred
sales charge;
WHEREAS, the Trust proposes to engage in activities which are
primarily intended to result in the distribution and sale of the shares of the
Funds and to make payments in connection with the distribution of the shares of
the Funds, and the Trust desires to adopt a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act;
WHEREAS, the principal distribution coordinator of the shares of the
Funds (the "Distribution Coordinator") proposes to incur substantial expenses in
rendering distribution services for the Funds; and
WHEREAS, the Board has determined that there is a reasonable
likelihood that adoption of this Plan will benefit the Funds and
their shareholders.
NOW, THEREFORE, the Trust hereby adopts this Plan with respect to
the shares of each Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. ANNUAL FEE. The Trust will pay to the Distribution Coordinator,
as the Funds' principal distribution coordinator, an annual fee for the
Distribution Coordinator's serving in such capacity and providing certain
distribution-related services. The annual fee paid to the Distribution
Coordinator under the Plan will be calculated daily and paid monthly in arrears
by each Fund on the first day of each month based on the average daily net
assets of such Fund at an annual rate of 0.20% of 1.0% on each Fund's first
$50,000,000 of average net assets, 0.10% of 1.0% on the next $50,000,000 of
average net assets, and 0.05% of 1.0% on average net assets in excess of
$100,000,000, subject to a minimum annual fee of $50,000. In addition, the
Trust will pay the expenses incurred by the Distribution Coordinator which are
primarily intended to resultin the sale of a Fund's shares ("Distribution
Expenses"). Payments under thisPlan are not tied exclusively to actual
distribution and service expenses, and the payments may exceed distribution
and service expenses actually incurred.
2. DISTRIBUTION EXPENSES IN EXCESS OF OR LESS THAN AMOUNT OF FEE.
The fees paid by the Trust on behalf of each Fund shall not be refundable if in
any given year the fees are greater than the Distribution Expenses for that
year. Distribution Expenses will be paid on a first-in, first-out basis.
In no event shall the total of the compensation payable and out-of-pocket
reimbursements under sections 1 and 2 exceed on an annual basis 0.25% of a
Fund's average daily net assets.
3. EXPENSES COVERED BY THE PLAN. Distribution Expenses which may
be paid under the Plan are those expenses primarily intended to result in the
sale of a Fund's shares ("distribution services"), including, but not limited
to: (a) costs of payments, including incentive compensation, made to agents for
and consultants to the Distribution Coordinator, any affiliate of the
Distribution Coordinator or the Trust, including pension administration firms
that provide distribution and shareholder related services and broker-dealers
that engage in the distribution of a Fund's shares; (b) payments made to, and
expenses of, persons who provide support services in connection with the
distribution of a Fund's shares and servicing of a Fund's shareholders,
including, but not limited to, personnel of the Distribution Coordinator
and the Fund's investment manager, office space and equipment, telephone
facilities, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Trust's transfer agency or other servicing
arrangements; (c) payments made pursuant to any Distribution Coordination
Agreement (the form of which is attached hereto as exhibit) or other Service
Agreement; (d) fees and costs relating to the formulation and
implementation of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising; (e) costs of printing and distributing
prospectuses, statements of additional information and reports of the Funds to
prospective shareholders of the Funds; (f) costs involved in preparing, printing
and distributing sales literature pertaining to the Fund; and (g) costs involved
in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities that the Trust may, from time to time, deem
advisable. Such expenses shall be deemed incurred whether paid directly by the
Distribution Coordinator or by a third party to the extent reimbursed therefor
by the Distribution Coordinator.
4. WRITTEN REPORTS. The Distribution Coordinator shall furnish to
the Board, for its review, on a quarterly basis, a written report of the monies
paid to it under the Plan with respect to each Fund, and shall furnish the Board
with such other information as the Board may reasonably request in connection
with the payments made under the Plan in order to enable the Board to make an
informed determination of whether the Plan should be continued as to each Fund.
5. TERMINATION. The Plan may be terminated as to any Fund at any
time, without penalty, by vote of a majority of the outstanding voting
securities of such Fund, and any Distribution Coordination Agreement under the
Plan may be likewise terminated at any time. Once terminated, no further
payments shall be made under the Plan.
6. AMENDMENTS. The Plan and any Distribution Coordination Agreement
or related distribution or service agreement may not be amended with respect to
a Fund to increase materially the amount to be spent by the Fund for
distribution and servicing of Fund shares pursuant to Section 1 hereof
without approval by a majority of the outstanding voting securities of such
Fund. All material amendments to the Plan and any Distribution Coordination
Agreement or related distribution or service agreement entered into with
third parties shall be approved by the Trust's independent Trustees cast in
person at a meeting called for the purpose of voting on any such amendment.
The Distribution Coordinator may assign its responsibilities and liabilities
under the Plan to another party who agrees to act as principal distribution
coordinator for the Trust with the consent of a majority of the Trust's
independent Trustees.
7. SELECTION OF INDEPENDENT TRUSTEES. So long as the Plan is in
effect, the selection and nomination of the Trust's independent Trustees shall
be committed to the discretion of such independent Trustees.
8. EFFECTIVE DATE OF PLAN. The Plan shall take effect at such time
as it has received the requisite Trustee and shareholder approval and, unless
sooner terminated, shall continue in effect for a period of more than one year
from the date of its execution only so long as such continuance is specifically
approved at least annually by the Board, including a majority of the independent
Trustees, cast in person at a meeting called for the purpose of voting on such
continuance.
9. PRESERVATION OF MATERIALS. The Trust will preserve copies of the
Plan, any agreements relating to the Plan and any reports made pursuant to
Section 4 above, for a period of not less than six years (the first two years in
an easily accessible place) from the date of the Plan, agreement or report.
10. MEANINGS OF CERTAIN TERMS. As used in this Plan, the terms
"interested person" and "majority of the outstanding voting securities" will be
deemed to have the same meaning that those terms have under the Act and the
rules and regulations under the Act, subject to any exemption that may be
granted to the Trust under the Act by the Securities and Exchange Commission.
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Trust and the Distribution Coordinator, as evidenced by their
execution hereof, as of this ___th day of _______ 1996.
THE PURISIMA FUNDS
By:
------------------------------
Title:
---------------------------
SUNSTONE FINANCIAL GROUP, INC.,
as Principal Distribution Coordinator
By:
-------------------------------
Title:
----------------------------
THE PURISIMA FUNDS
Distribution Coordination Agreement
EXHIBIT ONLY
- -----------------------------------
- -----------------------------------
Ladies and Gentlemen:
This Distribution Coordination Agreement has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Company
Act"), by THE PURISIMA FUNDS, a Delaware business trust (the "Trust"), on behalf
of the series of the Trust (each series, a "Fund"), as governed by the terms of
the Trust's Service and Distribution Plan adopted pursuant to such Rule 12b-1
(the "Plan").
The Plan has been approved by a majority of the Trust's Trustees who
are not interested persons of the Trust or the Funds and who have no direct or
indirect financial interest in the operation of the Plan (the "independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
Plan. Such approval included a determination that in the exercise of the
reasonable business judgment of the Board of Trustees and in light of the
Trustees' fiduciary duties, there is a reasonable likelihood that the Plan will
benefit each Fund and its shareholders. The Plan also has been approved by a
vote of at least a majority of the outstanding voting securities of each Fund,
as defined in the Company Act.
1. To the extent you provide eligible shareholder services of the
type identified in the Plan to the Funds identified in the attached Schedule
(the "Schedule"), we shall pay you a quarterly fee based on the average net
asset value of Fund shares during any quarter which are attributable to
customers of your firm, at the rate set forth on the Schedule.
2. In no event may the aggregate annual fee paid to you pursuant to
the Schedule exceed ___ percent of the value of the net assets of each Fund
held in your customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as the Fund uses to compute its net
assets as set forth in its then effective Prospectus), without approval by a
majority of the outstanding shares of each Fund. Subject to that limitation,
the fee rate may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Furthermore, we may, in our
discretion and without notice, suspend or withdraw the sale of shares,
including the sale of shares to you for the account of any customer or
customers.
3. You shall furnish us and the Trust with such information as shall
reasonably be requested by us or the Trust's Board of Trustees with respect to
the services performed by you and the fees paid to you pursuant to the Schedule.
4. We shall furnish to the Board of Trustees of the Trust, for its
review, on a quarterly basis, a written report of the amounts expended under the
Plan by us with respect to each Fund and the purposes for which such
expenditures were made.
5. You agree to make shares of the Funds available only (a) to your
customers or entities that you service at the net asset value per share next
determined after receipt of the relevant purchase instruction or (b) to each
such Fund itself at the redemption price for shares of the Fund, as described in
each Fund's then-effective Prospectus.
6. No person is authorized to make any representations concerning a
Fund or shares of a Fund except those contained in each Fund's then-effective
Prospectus or Statement of Additional Information and any such information as
may be released by a Fund as information supplemental to such Prospectus or
Statement of Additional Information.
7. Additional copies of each such Prospectus or Statement of
Additional Information and any printed information issued as supplemental to
each such Prospectus or Statement of Additional Information will be supplied by
each Fund to you in reasonable quantities upon request.
8. In no transaction shall you have any authority whatever to act as
agent of the Funds and nothing in this Agreement shall constitute you or any
Fund the agent of the other. You are not authorized to act as an underwriter of
shares of the Funds or as a dealer in shares of the Funds.
9. By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us, the Trust and the Funds harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of shares (or orders relating to the same)
by or on behalf of your customers. You and your employees will, upon request,
be available during normal business hours to consult with us or our designees
concerning the performance of your responsibilities under this Agreement.
10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (a) the compensation payable to you hereunder, together
with any other compensation you receive from your customers for services
contemplated by this Agreement, will not be excessive or unreasonable under the
laws and instruments governing your relationships with your customers; (b) you
will provide to your customers a schedule of any fees that you may charge to
them relating to the investment of their assets in shares; (c) you are a member
in good standing of the NASD and registered as a broker-dealer under the federal
and all applicable state securities laws; (d) you are empowered under applicable
law and by your organizational documents to enter into and perform this
Agreement, and all requisite actions have been taken to authorize you to enter
into and perform this Agreement; and (e) you will comply at all times with all
applicable laws, rules and regulations.
11. All communications to the Funds shall be sent to: Sunstone
Financial Group, Inc., as Distribution Coordinator for the Funds, 207 E. Buffalo
Street, Milwaukee, WI 53217. Any notice to you shall be duly given if mailed or
telegraphed to you at your address as indicated in this Agreement.
12. This Agreement may be terminated by us or by you, by the vote of
a majority of the independent Trustees, or by a vote of a majority of the
outstanding shares of a Fund, or at any time upon written notice, all without
payment of any penalty. This Agreement shall also be terminated automatically
in the event of its assignment or by any act that terminates the Plan.
13. The provisions of the Plan between the Trust and us, insofar as
they relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below, and the
terms and provisions thereof are hereby accepted and agreed to by us as
evidenced by our execution hereof.
SUNSTONE FINANCIAL GROUP, INC.,
Distribution Coordinator
By: EXHIBIT ONLY
Authorized Officer
Dated:
------------------------
Agreed and Accepted:
(Name)
By:
------------------------
(Authorized Officer)
THE PURISIMA FUNDS
SCHEDULE TO DISTRIBUTION COORDINATION AGREEMENT
BETWEEN SUNSTONE FINANCIAL GROUP, INC.
AS DISTRIBUTION COORDINATOR
AND
(Name)
Pursuant to the provisions of the Distribution Coordination Agreement
between the above parties with respect to The Purisima Funds, Sunstone
Financial Group, Inc., as Distribution Coordinator, shall pay a quarterly
fee to the above-named party based on the average net asset value of shares
of each Fund during the previous calendar quarter the sales of which are
attributable to the above-named party, as follows:
the following is a table sans lines
Fund Fee
---- ---
EXHIBIT 17
[ARTICLE] 6
[CIK] 0001019946
[NAME] PURISIMA FUNDS
[SERIES]
[NUMBER] 1
[NAME] PURISIMA TOTAL RETURN FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 1-MO
[FISCAL-YEAR-END] AUG-30-1997
[PERIOD-END] SEP-17-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 100,000
[OTHER-ITEMS-ASSETS] 80,245
[TOTAL-ASSETS] 180,245
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 80,245
[TOTAL-LIABILITIES] 80,245
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 99,000
[SHARES-COMMON-STOCK] 1,000
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100,000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 100,000
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
