<PAGE> 1
As filed with the Securities and Exchange Commission on October 3, 1997
File Nos. 333-32483 and 811-8305
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 2 [X]
------------------
EUREKA FUNDS
------------
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Address of Principal Business Office)
614-470-8000
------------
(Registrant's Telephone Number, including Area Code)
George O. Martinez
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Name and Address of Agent for Service)
Copies of communications to:
Martin E. Lybecker, Esq. Eureka Funds
Ropes & Gray 3534 Stelzer Road
1301 K Street, N.W. Columbus, Ohio 43219
Suite 800 East
Washington, D.C. 20004
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
DECLARATION PURSUANT TO RULE 24F-2: Pursuant to Rule 24f-2 under the Investment
Company Act of 1940, the Registrant hereby elects to register an indefinite
number or amount of its shares of beneficial interest under the Securities Act
of 1933.
Registrant hereby amends the Registration Statement under the Securities Act of
1933 on such date or dates as may be necessary to delay its effective date
until Registrant shall file a further amendment that specifically states that
such 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 Section 8(a), shall determine.
<PAGE> 2
CROSS REFERENCE SHEET
---------------------
PROSPECTUS FOR EUREKA FUNDS
---------------------------
TRUST SHARES
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<TABLE>
<CAPTION>
Part A Item Prospectus Caption
- ----------- ------------------
<S> <C>
Cover Page.................................................... Cover Page
Synopsis...................................................... Prospectus Summary; Fee Table
Condensed Financial Information............................... Inapplicable
General Description
of Registrant.............................................. Prospectus Summary; Investment
Objective and Policies; General
Information - Description of the Eureka
Funds and Its Shares
Management of Eureka Funds ................................... Management of Eureka Funds;
General Information
Management's Discussion of
Fund Performance............................................ Inapplicable
Capital Stock and
Other Securities........................................... Eureka Funds; How to Purchase
and Redeem Shares; Dividends
and Taxes; General Information -
Description of the Eureka Funds
and Its Shares; General Information -
Miscellaneous
Purchase of Securities
Being Offered.............................................. Valuation of Shares; How to Purchase
and Redeem Shares
Redemption or Repurchase...................................... How to Purchase and Redeem Shares
Pending Legal Proceedings..................................... Inapplicable
</TABLE>
<PAGE> 3
EUREKA FUNDS
<TABLE>
<S> <C>
3435 Stelzer Road
Columbus, Ohio 43219
Investment Adviser: Sanwa Bank California
</TABLE>
THE EUREKA FUNDS is an open-end management investment company consisting of
five separate investment funds (each a "Fund," and collectively, the "Funds").
Each Fund offers multiple classes of units of beneficial interest ("Shares").
THE EUREKA PRIME MONEY MARKET FUND (the "Prime Money Market Fund") seeks as
high a level of current income as is consistent with maintaining liquidity and
stability of principal.
THE EUREKA U.S. TREASURY OBLIGATIONS FUND (the "U.S. Treasury Obligations
Fund"), seeks current income consistent with liquidity and stability of
principal. The Fund intends to invest exclusively in short-term obligations
issued or guaranteed by the U.S. Treasury and repurchase agreements fully
collateralized by U.S. Treasury securities.
------------------------
AN INVESTMENT IN THE PRIME MONEY MARKET FUND OR THE U.S. TREASURY OBLIGATIONS
FUND (TOGETHER, THE "MONEY MARKET FUNDS") IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET FUNDS WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
THE EUREKA INVESTMENT GRADE BOND FUND (the "Investment Grade Bond Fund")
seeks a high level of income, consistent with preservation of capital.
THE EUREKA GLOBAL ASSET ALLOCATION FUND (the "Global Asset Allocation Fund")
seeks a balance of income and long-term capital appreciation. The Fund intends
to invest in a mix of U.S. and international stocks, bonds, and cash equivalents
using a disciplined asset allocation approach.
THE EUREKA EQUITY FUND (the "Equity Fund") seeks long-term capital growth.
The Fund intends to invest in the common stocks of corporations representing a
broad cross-section of the U.S. economy. The Fund expects to have a level of
risk commensurate with that represented by a broadly diversified portfolio of
U.S. common stocks, such as the Standard & Poor's 500 Index. There can be no
assurance that the Fund's investment performance will meet or exceed that of the
S&P 500 Index.
This Prospectus relates to the Trust Shares of Eureka Funds, which are
offered to Sanwa Bank California and its affiliates and other financial service
providers approved by the Distributor for the investment of funds for which they
act in a fiduciary, advisory, agency, custodial (other than for individual
retirement accounts), or similar capacity. Through a separate prospectus, the
Eureka Funds also offers Class A Shares, which are offered to the general
public. A Statement of Additional Information, dated October 31, 1997 (as may be
amended from time to time), has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Statement of Additional
Information and the prospectus relating to the Class A Shares are available
without charge by contacting the Eureka Funds at the address shown above.
This Prospectus sets forth concisely the information an investor should know
before investing and should be read carefully and retained for future reference.
------------------------
SHARES OF THE EUREKA FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, SANWA BANK CALIFORNIA, ANY OF ITS AFFILIATES, OR ANY OTHER BANK.
SUCH SHARES ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THE EUREKA FUNDS INVOLVES INVESTMENT RISKS
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Prospectus is October 31, 1997.
<PAGE> 4
PROSPECTUS SUMMARY
THE EUREKA FUNDS The Eureka Funds, a Massachusetts business trust,
is a diversified open-end management investment
company which currently consists of five separately
managed Funds. Each Fund offers to the public two
classes of Shares: Class A and Trust Class. This
prospectus relates to only the Trust Class Shares.
INVESTMENT OBJECTIVE THE PRIME MONEY MARKET FUND seeks as high a level
of current income as is consistent with maintaining
liquidity and stability of principal.
THE U.S. TREASURY OBLIGATIONS FUND seeks current
income consistent with liquidity and stability of
principal.
THE INVESTMENT GRADE BOND FUND seeks a high level
of income, consistent with preservation of capital.
THE GLOBAL ASSET ALLOCATION FUND seeks a balance of
income and long-term capital appreciation.
THE EQUITY FUND seeks long-term capital growth.
INVESTMENT RISKS There can be no assurance that the Money Market
Funds will be able to maintain a stable net asset
value. The other Funds' net asset value and each
Fund's performance may vary daily, reflecting
fluctuations in the market value of its portfolio
holdings, interest rate levels, and market
conditions. The Investment Grade Bond Fund is
primarily subject to the risks of a potential for
decline in the market value of bonds due to
interest rate changes or the ability of an issuer
to meet its obligations. The Global Asset
Allocation Fund and the Equity Fund are primarily
exposed to the risk that stock prices will decline
over short or even extended periods. Foreign
securities, which the Prime Money Market Fund,
Investment Grade Bond Fund, and Global Asset
Allocation Fund may invest in, involve risks not
associated with domestic investing. Foreign
securities markets are not always as efficient as
those in the United States and are often less
liquid and more volatile. See "Investment Practices
and Securities" for a discussion of the Funds'
investments and the risks associated with investing
in the Funds.
OFFERING PRICE The public offering price of the Prime Money Market
Fund and the U.S. Treasury Obligations Fund is
equal to the net asset value per Trust Share, which
each Fund will seek to maintain at $1.00.
The public offering price of the Investment Grade
Bond Fund, the Global Asset Allocation Fund, and
the Equity Fund is equal to that Fund's net asset
value per Trust Share. See "HOW TO PURCHASE AND
REDEEM SHARES--Purchases of Trust Shares."
MINIMUM PURCHASE For Trust Shares there is a $100,000 minimum
initial investment with no minimum investment for
subsequent purchases. Employees of Sanwa Bank
California may purchase Trust Shares with a $500
minimum initial
2
<PAGE> 5
investment, or a $50 minimum initial investment if
investing through the Eureka Funds' Automatic
Investment Plan. See "HOW TO PURCHASE AND REDEEM
SHARES--Auto Invest Plan."
INVESTMENT ADVISER Sanwa Bank California ("SBCL"), Los Angeles,
California.
DIVIDENDS The Prime Money Market Fund, the U.S. Treasury
Obligations Fund, and the Investment Grade Bond
Fund declare dividends daily and pay such dividends
monthly. The Global Asset Allocation Fund declares
and pays dividends annually. The Equity Fund
declares and pays dividends monthly.
DISTRIBUTOR BISYS Fund Services, Inc., Columbus, Ohio.
3
<PAGE> 6
FEE TABLE
The following tables are intended to assist investors in understanding the
expenses associated with investing in Trust Shares of the Funds.
<TABLE>
<CAPTION>
U.S. GLOBAL
TREASURY INVESTMENT ASSET
PRIME MONEY OBLIGATIONS GRADE BOND ALLOCATION
MARKET FUND FUND FUND FUND EQUITY FUND
----------- ----------- ----------- ----------- -----------
TRUST CLASS TRUST CLASS TRUST CLASS TRUST CLASS TRUST CLASS
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load on Purchases.................. None None None None None
Maximum Sales Load on Reinvested Dividends....... None None None None None
Maximum Deferred Sales Load...................... None None None None None
Redemption Fees(2)............................... None None None None None
Exchange Fee..................................... None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)(3)
Management Fees (after voluntary fee
reductions).................................... 0.20% 0.10% 0.50% 0.80% 0.65%
12b-1 Fee........................................ 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses(4)................................ 0.35% 0.36% 0.40% 0.64% 0.37%
--- --- --- --- ---
Total Fund Operating Expenses (after voluntary
fee reductions)................................ 0.55% 0.46% 0.90% 1.44% 1.02%
=== === === === ===
EXAMPLE:
You would pay the following expenses on a $1,000
investment in Trust Shares of the Funds, assuming (1)
5% annual return and (2) redemption at the end of
each time period.
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Prime Money Market Fund...................................................................... $ 6 $ 18
U.S. Treasury Obligations Fund............................................................... $ 5 $ 15
Investment Grade Bond Fund................................................................... $ 9 $ 29
Global Asset Allocation Fund................................................................. $ 15 $ 46
Equity Fund.................................................................................. $ 10 $ 32
</TABLE>
- ------------
(1) A Participating Organization (as defined in this Prospectus) may charge a
Customer's (as defined in the Prospectus) account fees for automatic
investments, exchanges, and other investment management services provided in
connection with investment in Trust Shares of a Fund. See "HOW TO PURCHASE
AND REDEEM SHARES--Purchases of Trust Shares" and "HOW TO PURCHASE AND
REDEEM SHARES--Exchange Privilege."
(2) A wire redemption charge may be deducted from the amount of a wire
redemption payment made at the request of a shareholder. See "HOW TO
PURCHASE AND REDEEM SHARES--Redemption by Telephone."
(3) SBCL has agreed to voluntarily reduce the amount of its investment advisory
fee through the end of the Funds' initial fiscal year. Certain other fees
will also be voluntarily reduced. Absent the voluntary reduction of
investment advisory fees and other expenses, Management Fees, Other Expenses
and Total Operating Expenses as a percentage of average daily net assets for
Trust Shares would be 0.30%, 0.39% and 0.69%, respectively, for the Prime
Money Market Fund; 0.20%, 0.40% and 0.60%, respectively, for the U.S.
Treasury Obligations Fund; 0.60%, 0.40% and 1.00%, respectively, for the
Investment Grade Bond Fund; 0.90%, 0.64% and 1.54%, respectively, for the
Global Asset Allocation Fund; and 0.75%, 0.37% and 1.12%, respectively, for
the Equity Fund. Lower total fund operating expenses will result in higher
yields.
(4) "Other Expenses" are based on estimated amounts for the current fiscal year.
Trust Shares are not subject to a 12b-1 fee and are not sold pursuant to a
sales charge.
These tables are intended to assist investors in understanding the various
costs and expenses associated with investing in the Funds. See "MANAGEMENT OF
EUREKA FUNDS" for a more complete discussion of annual operating expenses of
each Fund. THE EXAMPLE IS NOT CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE FUNDS' ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 7
INVESTMENT OBJECTIVES AND POLICIES
MONEY MARKET FUNDS
Each Money Market Fund will endeavor to achieve its objective by investing in
a portfolio of high-quality money market instruments which complies with the
diversification and other requirements of Rule 2a-7 under the Investment Company
Act of 1940 (the "1940 Act"). All instruments in which the Money Market Funds
invest will be deemed to have maturities of 397 days or less. The average dollar
weighted maturity of each Money Market Fund's portfolio will not exceed 90 days.
See "VALUATION OF SHARES" and the Statement of Additional Information for a
further explanation of the amortized cost valuation method.
All securities acquired by the Money Market Funds will be determined at the
time of purchase, under guidelines established by the Eureka Funds' Board of
Trustees, to present minimal credit risks. Under the guidelines adopted by the
Board of Trustees and in accordance with Rule 2a-7 under the 1940 Act, SBCL may
be required to dispose of an obligation held in a Fund's portfolio if there is
an indication that the instrument's credit quality has diminished, such as where
a nationally recognized statistical ratings organization ("NRSRO") downgrades an
obligation to below the second highest rating category or in the event of a
default relating to the financial condition of the issuer.
PRIME MONEY MARKET FUND
The investment objective of the Prime Money Market Fund is to seek as high a
level of current income as is consistent with maintaining liquidity and
stability of principal. The Fund will invest in certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements, reverse
repurchase agreements, other money market securities, short-term corporate,
state, and municipal obligations that are rated in the top two tiers by an NRSRO
or, if unrated, are of comparable quality. The Fund also invests in securities
whose interest and principal payments are backed by the full faith and credit of
the U.S. government or by an agency of the U.S. government (certain agency
securities are not backed by the full faith and credit of the U.S. government).
U.S. TREASURY OBLIGATIONS FUND
The investment objective of the U.S. Treasury Obligations Fund is to seek
current income consistent with liquidity and stability of principal. Under
normal market conditions, the Fund will invest exclusively in short-term
obligations issued or guaranteed by the U.S. Treasury and repurchase agreements
fully collateralized by U.S. Treasury securities.
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund seeks a high level of income, consistent with
preservation of capital. To achieve this objective, the Fund intends to invest
in a broad range of fixed income securities, including U.S. Treasury securities
(bonds, notes, and bills), U.S. agency securities, mortgage related securities,
corporate securities, preferred stocks, depository institution obligations, and
repurchase agreements. Under normal market conditions, the Fund will invest at
least 80% of its net assets in bonds (i.e., debt securities) which are
investment grade securities, as determined by NRSRO ratings, or if unrated, as
determined by SBCL to be of comparable quality.
The Fund will invest in a varying combination of cash, U.S. Treasury
securities, U.S. agency securities, mortgage related securities, and corporate
securities which are all issued in U.S. dollars. In pursuing its investment
objective, the Fund expects that its portfolio will be characterized by
investment risk that is similar to that of a theoretical broadly diversified
domestic investment grade bond portfolio, such as a portfolio structured to
match the Salomon Broad Investment Grade Index or the Lehman Aggregate Index.
SBCL uses its proprietary, quantitative fixed income security selection
strategy to determine the optimal combination of investments in the portfolio.
SBCL will use a variety of quantitative investment models and risk management
systems to identify the
5
<PAGE> 8
optimal interest rate, credit, and convexity exposure at any point in time. SBCL
seeks the fixed income sectors and/or securities with high expected relative
return premiums, adjusted for risk. Fundamental valuation, macroeconomic,
technical and risk measures are all employed to determine the expected relative
return premium for each sector and/or security. Once the attractiveness of the
various investment sector and individual security alternatives is determined,
the portfolio is constructed so as to overweight those sectors and/or securities
with the most-favorable prospects, according to the current quantitative
analysis.
In order to execute its strategy in an efficient manner, SBCL may utilize bond
index futures contracts in representing various yield curve sectors. The Fund
will use futures contracts to provide an efficient means of achieving exposure
to the fixed income markets. Futures contracts may be used to provide liquidity,
gain broad market exposure, and hedge unwanted interest rate exposure. SBCL will
not use futures to leverage the Fund's holdings.
The Fund may invest up to 20% of its net assets in non-investment grade debt
securities, preferred stocks and convertible securities. In the event that a
security held by the Fund is downgraded, the Fund may continue to hold such
security until such time as SBCL deems it to be advantageous to dispose of the
security.
The Fund may hold securities of foreign issuers, provided such securities are
denominated in U.S. dollars. The Fund may also invest in bond (interest rate)
futures and options to a limited extent. See "Investment Objective and
Policies--Specific Investment Policies."
GLOBAL ASSET ALLOCATION FUND
The investment objective of the Global Asset Allocation Fund is to seek a
balance of income and long-term capital appreciation. Through the use of a
disciplined asset allocation approach, the Fund intends to invest in, and assume
a level of risk commensurate with, a globally diversified portfolio of stocks,
bonds, and cash equivalents. By systematically diversifying across countries,
currencies, and asset classes (stocks and bonds), the Fund pursues its capital
appreciation goals while seeking to control portfolio risk. Under normal market
conditions, the Fund will invest at least 25% of its net assets in fixed income
securities.
The Fund will invest in a varying combination of stocks, bonds, and cash
equivalents selected primarily from major markets such as: the United States,
Japan, the U.K., Germany, France, Switzerland, Spain, Canada and Australia. The
Fund may also invest in other markets, including emerging markets.
Under normal circumstances, at least 65% of the Fund's net assets will be
invested in securities representing at least three different countries,
including the United States.
SBCL uses its proprietary, quantitative global tactical asset allocation,
global currency allocation, and global sector rotation strategies to determine
the optimal combination of investments in the portfolio. SBCL will use a variety
of quantitative investment models to identify the country, sector, and asset
classes deemed most attractive. SBCL seeks those sectors, asset classes,
countries, and currencies with a high expected relative return premium, adjusted
for risk. Fundamental valuation, macro-economic, technical, and risk measures
are all employed to determine the expected relative return premium for each
country, currency, asset class, and sector. Once the relative attractiveness of
the various investment class alternatives is determined, the portfolio is
constructed so as to overweight those countries, currencies, sectors, and asset
classes with the most favorable prospects, according to the current quantitative
analysis.
In evaluating equity exposure, SBCL attempts to assess the relative value of
each country's market in the aggregate. SBCL may overweight the Fund's
investments in a few selected countries and/or asset classes. The Fund typically
will not deviate by more than 20% from the market capitalization weights of the
respective individual equity markets. Relative market capitalization of each
equity market is determined by that market's representation in the Salomon
Brothers World Equity Primary Market
6
<PAGE> 9
Europe & Pacific Basin Index (PMI EPAC) or the Morgan Stanley Capital
International Europe, Australasia, and the Far East Index (MSCI EAFE). For
example, if the Japanese equity market represents 30% of an index, then the Fund
will typically invest not less than 10% nor more than 50% of its assets in the
Japanese equity market.
Investments will also include direct investments in short-term or long-term
government bonds, and U.S. and foreign cash equivalents. Bonds in the Fund's
portfolio are expected to range in maturity from one to thirty years.
In order to execute its strategy in an efficient manner, SBCL may utilize
equity index, bond index, and currency futures contracts in the various
countries. The Fund will use futures contracts to provide an efficient means of
achieving broad market exposure to the stock, fixed income and currency markets
of a particular country, to provide liquidity, and to facilitate asset
allocation shifts. Currency futures provide an efficient vehicle for hedging
foreign exchange exposure. By investing in a stock index futures contract the
Fund is exposed to an index of stocks without buying each underlying security in
that index. See "Options and Futures" in the Statement of Additional Information
for a more detailed discussion of the risks associated with investment in
futures contracts.
EQUITY FUND
The Equity Fund's investment objective is to seek long-term capital growth.
The Fund intends to invest in the common stocks of corporations from a broad
cross section of the U.S. economy. The Fund expects to assume a level of risk
commensurate with that represented by a broadly diversified portfolio of U.S.
common stocks, such as that measured by the S&P 500 Index. Under normal market
conditions, the Fund will invest at least 65% of its net assets in common
stocks.
Equity investments are chosen based upon SBCL's proprietary,
quantitatively-disciplined stock selection models. A combination of valuation,
growth, technical, and risk measures are used to rank a universe of
approximately 1,000 U.S. equity issues. The issues assigned the most attractive
overall composite ratings are those which are deemed to have greater potential
for price appreciation over a short-to-intermediate term horizon. The portfolio
is then constructed so that the aggregate investment characteristics of the Fund
are similar to those of the S&P 500 Index. These characteristics include such
measures as economic sector diversification, P/E ratio, dividend yield, and
market "beta" (or sensitivity). However, while maintaining aggregate investment
characteristics similar to those of the S&P 500 Index, the Fund seeks to invest
in individual common stocks--including stocks which may not be part of that
Index--which SBCL believes hold a greater potential for price appreciation.
There can be no assurance that the Fund's investment performance will meet or
exceed that of the S&P 500 Index.
Although the Fund normally intends to be fully invested in common stocks, it
may invest temporarily in certain short-term fixed income securities. Such
securities may be used to invest uncommitted cash balances or to maintain
liquidity in order to meet shareholder redemptions.
The Fund may also utilize equity index futures for the dual purpose of
providing an adequate level of liquidity to the Fund and ensuring that cash
balances achieve equity-like returns. This "equitization" of short-term cash
balances will assist the Fund to meet its investment objective. By investing in
a stock index futures contract the Fund is exposed to an index of stocks without
buying each underlying security in that index. Under no circumstances will the
market exposure of futures contracts exceed 30% of the Fund's net assets. SBCL
will not use futures to leverage the Fund's holdings. See "Options and Futures"
in the Statement of Additional Information for a more detailed discussion of the
risks associated with investments in futures contracts.
ALL FUNDS
The investment objective of each Fund is fundamental and may not be changed
without the vote of a majority of the outstanding Shares of the Fund (as defined
below under "GENERAL INFORMA-
7
<PAGE> 10
TION--Miscellaneous"). There can be no assurance that a Fund will achieve its
investment objective.
SPECIFIC INVESTMENT POLICIES
The Funds invest in a variety of securities and employ a number of investment
practices. Each security and investment practice involves certain risks. This
table shows the securities and investment practices utilized by the Funds and
the risks inherent in their use. For a more complete discussion of each
instrument and its attendant risks, consult the Funds' Statement of Additional
Information.
8
<PAGE> 11
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES AND SECURITIES
ASSET BACKED SECURITIES. Securities secured by company
receivables, home equity loans, truck and auto loans, leases,
credit card receivables and other securities backed by
receivables or assets. Credit, interest rate, opportunity and
pre-payment risks............................................... X -- X 35 35
BANKERS' ACCEPTANCES. Bills of exchange or time drafts drawn on
and accepted by a commercial bank. Credit risk.................. 25 -- 35+ 35+ 35+
BORROWINGS.(1) The borrowing of money from banks or through
reverse repurchase agreements. Leverage and credit risks........ 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
CERTIFICATES OF DEPOSIT. Negotiable instruments with a stated
maturity. Credit and liquidity risks............................ X -- 35+ 35+ 35+
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. Short-term
promissory notes or other obligations issued by corporations and
other entities. Credit risk..................................... X -- 35+ 35+ 35+
COMMON STOCK. Shares of ownership of a company. Market risk.... -- -- -- X X
CONVERTIBLE SECURITIES. Bonds or preferred stock that convert
to common stock. Credit, interest rate and market risks......... -- -- X X X
CORPORATE OR COMMERCIAL BONDS. Debt securities issued by
corporations. Credit and interest rate risks.................... X -- X X 35
DOLLAR ROLLS. A transaction in which a fund sells securities
for delivery in a current month and simultaneously contracts
with the same party to repurchase similar but not identical
securities on a specified future date. Interest rate, management
and market risks................................................ -- -- X X X
EMERGING MARKET SECURITIES. Securities of countries with
emerging economies or securities markets. Currency, information,
liquidity, market and political risks........................... -- -- -- 15 --
FOREIGN SECURITIES.
- - Stocks and bonds of foreign issuers........................... -- -- 35 X 35
- - American depository receipts, European depository receipts,
global depository receipts and other similar global
instruments................................................... X -- -- X 35
Currency, liquidity, information, market, natural event and
political risks.
FORWARD COMMITMENTS. The purchase or sale of a security with
payment and delivery scheduled for a future time. Leverage,
market and opportunity risks.................................... X X X X X
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Contractual
agreement to purchase or sell one specified currency for another
currency at a specified future date and price. Credit,
correlation, currency, information, leverage, liquidity,
management, market, opportunity and political risks............. -- -- -- 50 --
ILLIQUID SECURITIES.(3) Securities which may be difficult to
sell at an acceptable price. Liquidity, market and valuation
risks........................................................... 10 -- 15 15 15
INVESTMENT COMPANY SECURITIES. Shares of other mutual funds.
SBCL and BISYS Fund Services, Inc. will reduce certain fees when
investing in funds for which it serves as investment adviser or
administrator. (Investments in any one fund will not exceed 5%
of total assets. Investments in all funds will not exceed 10% of
total assets.) Management and Market Risks.
- - Money market mutual funds..................................... 10 10 10 10 10
- - Non-money market mutual funds................................. -- -- -- 10 --
MORTGAGE BACKED SECURITIES.(2) Debt obligations secured by real
estate loans and pools of loans, including such securities as
collateralized mortgage obligations, which are structured pools
of mortgage pass through certificates or mortgage loans, real
estate investment conduits, and stripped mortgage backed
securities. Mortgage backed securities may have greater price
and yield volatility than traditional fixed-income securities
and their prepayment sensitivity may range from relatively low
to relatively high. Credit, interest rate, opportunity and
pre-payment risks............................................... -- -- X 35 35
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS. Securities issued by a state or
political subdivision to obtain funds for various public
purposes. Municipal obligations include participation
certificates in leases, installment purchase contracts and
conditional sales contracts. Credit, liquidity, political and
tax risks....................................................... X -- X -- --
OPTIONS AND FUTURES.(1) Contracts involving the right or
obligation to deliver or receive assets or money depending upon
the performance of one or more assets or an economic index.
Currency, correlation, credit, interest rate, leverage,
liquidity, opportunity and market risks......................... -- -- X X X
PREFERRED STOCK. A class of stock that generally pays a
dividend at a specified rate and has preference over common
stock in the payment of dividends and liquidation. Market
risk............................................................ -- -- 30 X X
REPURCHASE AGREEMENTS.(1) The purchase of a security and the
simultaneous commitment to sell it back at an agreed upon price.
Credit, market and leverage risks............................... X X X X X
REVERSE REPURCHASE AGREEMENTS.(1, 4) The sale of a security and
the simultaneous commitment to buy it back at an agreed upon
price. Credit, leverage and market risks........................ X X X X X
RESTRICTED SECURITIES.(5) Securities not registered under the
Securities Act of 1933. Market and valuation risks.............. 10 -- X X X
RIGHTS AND WARRANTS. A contract issued by a corporation
enabling the owner to subscribe to and purchase a specified
number of shares of the corporation at a specified price during
a specified period of time. Market and valuation risks.......... -- -- X X X
SECURITIES LENDING.(1) The lending of securities to financial
institutions, which provide cash or government securities as
collateral. Credit risk......................................... 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
SHORT-TERM TRADING. The sale of a security soon after its
purchase. A portfolio engaging in such trading will have higher
turnover and transaction expenses. Market risk.................. -- -- X X X
SWAPS, CAPS AND FLOORS.(5) Swaps involve the exchange of
obligations by two parties. Caps and floors entitle a purchaser
to a principal amount from the seller of the cap or floor to the
extent that a specified index exceeds or falls below a
predetermined interest rate or amount. Correlation, credit,
interest rate, liquidity, management, market and opportunity
risks........................................................... -- -- X X X
TIME DEPOSITS. Non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Liquidity risk............... X -- 35+ 35+ 35+
U.S. GOVERNMENT SECURITIES. Short-term debt instruments issued
or guaranteed by the U.S. Treasury or by an agency or
instrumentalities of the U.S. government. Credit risk........... X X X X 35+
VARIABLE AND FLOATING RATE INSTRUMENTS. Obligations with a
yield that is reset on a periodic basis and loosely correlated
to changes in money market interest rates, including variable
and floating rate notes and bonds. Credit, interest rate and
liquidity risks................................................. X X X X --
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. The purchase or
sale of securities for delivery at a future date. Leverage,
market and opportunity risks.................................... X X X X X
</TABLE>
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# Percent of total assets under normal market conditions
X No policy limitation on usage
- - Not permitted
+ For temporary defensive purposes may constitute 100 percent of total assets
(1) Each Fund has a fundamental investment policy regarding these practices or
securities, as set forth in the Statement of Additional Information, which
may in some cases be less restrictive than the operating policy set forth
in the chart.
(2) The Money Market Funds may invest in these securities only if consistent
with their objectives and Rule 2a-7.
(3) Each Fund's liquidity limit is calculated as a percentage of its net
assets.
(4) Reverse repurchase agreements would also be subject to a Fund's policy on
borrowings.
(5) Relative to other securities, these securities are more likely to be
deemed illiquid and, therefore, may be subject to the restrictions on
illiquid securities.
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TYPES OF INVESTMENT RISK
CORRELATION RISK. The risk that changes in the value of a hedging instrument
will not match those of the asset being hedged (hedging is the use of one
investment to offset the effects of another investment). Incomplete correlation
can result in unanticipated risks and volatility.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK. The risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses.
INFORMATION RISK. The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK. The risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates typically
causes a fall in values, while a fall in rates typically causes a rise in
values.
LEVERAGE RISK. Associated with securities or practices (such as borrowing)
that multiply small index or market movements into large changes in value.
- HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. There can be no assurance that a Fund's hedging
transactions will be effective.
- SPECULATIVE. To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that the seller would like. The
seller may have to lower the price, sell other securities instead or forego an
investment opportunity, any of which could have a negative effect on fund
management or performance.
MANAGEMENT RISK. The risk that a strategy used by a fund's management may
fail to produce the intended result. This risk is common to all mutual funds.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than it
was worth at an earlier time. Market risk may affect a single issuer, industry,
sector of the economy or the market as a whole. Common to all stocks and bonds
and the mutual funds that invest in them.
NATURAL EVENT RISK. The risk of losses attributable to natural disasters,
crop failures and similar events.
OPPORTUNITY RISK. The risk of foregoing an investment opportunity because the
assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK. The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
There are also risks particular to investing in foreign securities, including
higher transaction costs, delayed settlements, currency controls and adverse
economic developments.
PRE-PAYMENT RISK. Early repayment of principal and interest will effect the
rate of return on mortgage-backed securities and may result in greater price and
yield volatility and possible investment losses. When mortgage obligations are
pre-paid, a Fund may have to reinvest in securities with
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a lower yield. During periods of declining interest rates, prepayment rates can
be expected to accelerate. Under certain interest rate and prepayment rate
scenarios, a Fund may fail to recoup any premium paid on mortgage-related
securities notwithstanding a direct or indirect governmental or agency
guarantee.
TAX RISK. The risk that the issuer of tax-exempt securities will fail to
comply with certain requirements of the Internal Revenue Code, which could cause
interest income to be retroactively included in gross income.
VALUATION RISK. The risk that a fund has valued certain of its securities at
a higher price than it can sell them for.
PORTFOLIO TURNOVER
It is presently anticipated that the portfolio turnover rate of the Investment
Grade Bond Fund, the Global Asset Allocation Fund, and the Equity Fund will not
exceed 100%, 200%, and 200%, respectively. High portfolio turnover rates will
generally result in higher transaction costs to a Fund and may result in higher
levels of taxable realized gains to a Fund's shareholders.
INVESTMENT RESTRICTIONS
The Funds are subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding shares of the particular
Fund ("fundamental policies"). These fundamental policies (including those noted
by Footnote 1 in the chart above) are set forth in their entirety in the Funds'
Statement of Additional Information.
VALUATION OF SHARES
The net asset value of each Fund is determined and its Shares are priced as of
the close of regular trading of the New York Stock Exchange (generally 4:00 p.m.
Eastern time) on each Business Day ("Valuation Times"). For each Money Market
Fund, a "Business Day" constitutes (i) any day on which the Federal Reserve Bank
is open and the New York Stock Exchange (the "NYSE") is open for trading and
(ii) any other day (other than a day during which no Shares are tendered for
redemption and no orders to purchase Shares are received) during which there is
sufficient trading in a Fund's portfolio instruments that the Fund's net asset
value per share might be materially affected. For each Fund, other than the
Money Market Funds, a Business Day is (i) any day on which the NYSE is open for
trading and (ii) any other day (other than a day during which no Shares are
tendered for redemption and no orders to purchase Shares are received) during
which there is sufficient trading in a Fund's portfolio instruments that the
Fund's net asset value per share might be materially affected. Net asset value
per Share for purposes of pricing sales and redemptions is calculated by
determining the value of the class's proportional interest in the securities and
other assets of a Fund, less (i) such class's proportional share of general
liabilities and (ii) the liabilities allocable only to such class, and dividing
such amount by the number of relevant class Shares outstanding.
The securities in each Fund, other than the Money Market Funds, will be valued
at market value. If market quotations are not available, the securities will be
valued by a method which the Board of Trustees believes accurately reflects fair
value.
The Money Market Funds use the amortized cost method of valuing their
securities. This method values a security at its cost on the date of purchase
and thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact fluctuating interest rates have on the market
value of the security. If the Board of Trustees determines that the deviation
from a $1.00 price per share may result in material dilution or other
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unfair results to Shareholders, it will take appropriate steps to eliminate or
reduce these consequences to the extent reasonably practicable. Such steps may
include selling portfolio securities prior to maturity in order to realize
capital gains or losses or to shorten the average portfolio maturity of a Fund,
adjusting or withholding dividends, or utilizing a net asset value per share
determined by using available market quotations. There can be no assurance that
a Money Market Fund will maintain a stable net asset value of $1.00 per Share.
Most international securities held by the Global Asset Allocation Fund are
priced based on their market value as determined by reported sales prices or the
mean between their bid and asked prices. Portfolio securities which are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. Securities for which market quotations are
not readily available are valued at fair market value as determined in good
faith by or under the direction of the Board of Trustees. The amortized cost
method of valuation will also be used with respect to debt obligations with
sixty days or less remaining to maturity unless SBCL under the supervision of
the Board of Trustees determines such method does not represent fair value.
For further information about the valuation of investments, see the Statement
of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares are sold on a continuous basis by the Eureka Funds' Distributor, BISYS
Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219. If you are an
employee of SBCL and you wish to purchase shares, contact the Eureka Funds at
888-890-8121. Customers of SBCL or one of its affiliates should contact them
directly for instructions on how to purchase shares.
PURCHASES OF TRUST SHARES
Trust Shares may be purchased through procedures established by the
Distributor in connection with the requirements of fiduciary, advisory, agency,
custodial and other similar accounts maintained by or on behalf of Customers of
SBCL or one of its affiliates (individually a "Bank" and collectively the
"Banks") or other financial service providers approved by the Distributor.
Shares of the Eureka Funds sold to the Banks acting in a fiduciary, advisory,
custodial (other than for individual retirement accounts), or other similar
capacity on behalf of Customers will normally be held of record by the Banks.
With respect to Shares so sold, it is the responsibility of the Banks to
transmit purchase or redemption orders to the Distributor and to deliver Federal
funds for purchase on a timely basis. Beneficial ownership of the Shares will be
recorded by the Banks and reflected in the account statements provided by the
Banks to Customers.
Trust Shares are sold at the net asset value next determined after receipt by
the Distributor of a purchase order in good form. See "VALUATION OF SHARES."
There is no sales charge imposed by the Eureka Funds in connection with the
purchase of Trust Shares.
Employees of SBCL may directly purchase Trust Shares of a Fund by completing
and signing an Account Registration Form and mailing it, together with a check
(or other negotiable bank draft or money order) for at least the minimum initial
purchase amount payable to the Eureka Funds, P.O. Box 182792, Columbus, Ohio
43218-2792. Employees may obtain an Account Registration Form and additional
information regarding the Eureka Funds by calling 888-890-8121. Subsequent
purchases of Trust Shares of a Fund may be made at any time by
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<PAGE> 16
mailing a check (or other negotiable bank draft or money order) to the above
address.
The minimum initial investment is $100,000, except for purchases by employees
of SBCL, in which case the minimum initial investment is $500, or $50 if part of
the Eureka Funds' automatic investment plan, as described below. There is no
minimum subsequent investment requirement. There is no limit on the amount of
Trust Shares that may be purchased.
ADDITIONAL INFORMATION ABOUT PURCHASING SHARES
Purchases of Trust Shares of the Eureka Funds will be effected only on a
Business Day (as defined in "VALUATION OF SHARES"). An order for a Fund received
prior to the Valuation Time on any Business Day will be executed at the net
asset value determined as of the next Valuation Time on the date of receipt. An
order received after the last Valuation Time on any Business Day will be
executed at the net asset value determined as of the next Valuation Time.
An order to purchase Trust Shares of a Money Market Fund will be deemed to
have been received by the Distributor when federal funds are available to the
Eureka Funds' custodian for investment. Federal funds are monies credited to a
bank's account within a Federal Reserve Bank. Payment for an order to purchase
Shares of a Money Market Fund which is transmitted by federal funds wire will be
available the same day for investment by the Eureka Funds' custodian, if
received prior to the last Valuation Time (see "VALUATION OF SHARES"). It is
strongly recommended that investors of substantial amounts use federal funds to
purchase Shares of a Money Market Fund.
Shares of a Money Market Fund purchased before 4:00 p.m., Eastern time, begin
earning dividends on the same Business Day. All Shares of a Money Market Fund
continue to earn dividends through the day before their redemption.
Depending upon the terms of a particular Customer account, a Participating
Organization or Bank may charge a Customer's account fees for services provided
in connection with investment in the Eureka Funds. Information concerning this
Prospectus should be read in conjunction with any such information received from
the Participating Organizations or Banks.
The Eureka Funds reserve the right to reject any order for the purchase of its
Trust Shares in whole or in part, including purchases made with foreign drafts
or checks. The Eureka Funds will not accept third party checks for investment.
Please contact SBCL or your Participating Organization regarding proper
instructions and information to purchase or redeem Shares by check or wire.
Shareholders may also execute telephone transactions as explained below.
AUTO INVEST PLAN
Eureka Funds' Auto Invest Plan enables those Shareholders who are employees of
SBCL to make regular purchases of Trust Shares through an automatic deduction
from their bank accounts. With Shareholder authorization, BISYS Fund Services,
Inc.(the "Transfer Agent") will deduct the amount specified (subject to the
applicable minimums) from the Shareholder's bank account and will automatically
invest that amount in Trust Shares at the public offering price on the date of
such deduction. The required minimum initial investment when opening an account
using the Auto Invest Plan is $50 per Fund; the minimum amount for subsequent
investments in a Fund is $50. To participate in the Auto Invest Plan,
Shareholders should complete the appropriate section of the Account Registration
Form or submit a subsequent written request to the Transfer Agent. To change the
frequency or amount of the Auto Invest Plan or to discontinue the feature, a
Shareholder may call the Eureka Funds at 888-890-8121. Changes to the Bank
information must be made in writing, with a signature guarantee (as described
below), to the Eureka Funds, P.O. Box 182792, Columbus, Ohio 43218-2792. The
Auto Invest Plan may be amended or terminated without notice at any time by the
Distributor.
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EXCHANGE PRIVILEGE
Trust Shares of each Fund may be exchanged for Trust Shares of the other
Funds, provided that the Shareholder making the exchange is eligible on the date
of the exchange to purchase Trust Shares (with certain exceptions and subject to
the terms and conditions described in this prospectus). Trust Shares of each
Fund may be exchanged for Class A Shares in instances where the Shareholder
ceases to be eligible to purchase Trust Shares.
The Eureka Funds do not impose a fee for processing exchanges of its Trust
Shares. Shareholders may exchange their Trust Shares for Trust Shares of another
Fund on the basis of the relative net asset value of the Shares exchanged.
An exchange is considered a sale of Shares and will result in a capital gain
or loss for federal income tax purposes, which, in general, is calculated by
netting the Shareholder's tax cost (or "basis") in the Shares surrendered and
the value of the Shares received in the exchange.
A Shareholder wishing to exchange Trust Shares purchased through a
Participating Organization or Bank may do so by contacting the Participating
Organization or Bank. If an exchange request in good order is received by the
Distributor or the Transfer Agent by 4:00 p.m. (Eastern time) on any Business
Day, the exchange usually will occur on that day. Any Shareholder who wishes to
make an exchange should obtain and review a prospectus describing the Fund and
class of Shares which he or she wishes to acquire before making the exchange.
The exchange privilege may be exercised only in those states where the class of
Shares of such other Fund may legally be sold. The Eureka Funds reserve the
right to change the terms and conditions of the exchange privilege discussed
herein upon sixty days written notice.
The Funds are not intended to serve as vehicles for frequent trading in
response to short-term fluctuations in the market. Due to the disruptive effect
that excessive trading can have on efficient portfolio management, the Funds
have established a policy of limiting exchange activity to four substantive
exchange redemptions from a Fund during any calendar year. There is a $500
minimum for all exchanges.
AUTO EXCHANGE
Eureka Funds Auto Exchange enables Shareholders, who are employees of Sanwa
Bank California, to make regular, automatic withdrawals from Trust Shares of a
Money Market Fund and use those proceeds to benefit from dollar-cost-averaging
by automatically making purchases of shares of another Eureka Fund. With
shareholder authorization, the Transfer Agent will withdraw the amount specified
(subject to the applicable minimums) from the Shareholder's Money Market Fund
account and will automatically invest that amount in Trust Shares of the Fund
designated by the Shareholder. In order to participate in the Auto Exchange,
Shareholders must have a minimum beginning balance of $10,000 in their Money
Market Fund account.
To participate in the Auto Exchange, Shareholders should complete the
appropriate section of the Account Registration Form, which can be acquired by
calling the Distributor. To change the Auto Exchange instructions or to
discontinue the feature, a Shareholder must send a written request to the Eureka
Funds, P.O. Box 182792, Columbus, Ohio 43218-2792. The Auto Exchange may be
amended or terminated without notice at any time by the Distributor.
REDEMPTION OF SHARES
Shareholders may redeem their Trust Shares without charge on any day that net
asset value is calculated (see "VALUATION OF SHARES") and Shares may ordinarily
be redeemed by mail or by telephone. However, all or part of a Customer's Shares
may be required to be redeemed in accordance with instructions and limitations
pertaining to his or her account held by a Participating Organization or Bank.
For example, if a Customer has agreed to maintain a minimum balance in his or
her account, and the balance in that account falls below that minimum, the
Customer may be obliged to
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redeem, or the Participating Organization or Bank
may redeem for and on behalf of the Customer, all or part of the Customer's
Shares to the extent necessary to maintain the required minimum balance. If a
distribution is to be made to a Customer who is not eligible to receive Trust
Shares, for whatever reason, then Class A Shares will be distributed to that
Customer.
Each Fund reserves the right to redeem a shareholder's Trust Shares if the
shareholder does not maintain a balance of $25,000 in the Trust Shares of that
Fund. Employees of SBCL will not be required to maintain a minimum balance in
Trust Shares of the Funds.
REDEMPTION BY MAIL
A written request for redemption must be received by the Eureka Funds in order
to constitute a valid tender for redemption. The signature on the written
request must be guaranteed by a bank, broker, dealer, credit union, securities
exchange, securities association, clearing agency or savings association, as
those terms are defined in Rule 17Ad-15 under the Securities Exchange Act of
1934 if (a) a redemption check is to be payable to anyone other than the
Shareholder(s) of record; or (b) a redemption check is to be mailed to the
Shareholder(s) at an address other than the address of record or other than to a
commercial bank designated on the Account Registration Form of such
Shareholder(s). The Distributor reserves the right to reject any signature
guarantee if (1) it has reason to believe that the signature is not genuine, (2)
it has reason to believe that the transaction would otherwise be improper, or
(3) the guarantor institution is a broker or dealer that is neither a member of
a clearing corporation nor maintains net capital of at least $100,000. A notary
public will not be accepted as a signature guarantee. Proceeds may be mailed to
the address of record or sent electronically or mailed to a previously
designated bank account without a signature guarantee. See "Redemption by
Telephone" for further discussion regarding sending proceeds to your bank
account.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option on
the Account Registration Form or in a subsequent written request to the Transfer
Agent. A Shareholder may have the proceeds mailed to the address of record or
sent electronically or mailed directly to a domestic commercial bank account
previously designated by the Shareholder on the Account Registration Form. Under
most circumstances, such payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. Such electronic redemption
requests may be made by the Shareholder by telephone to the Transfer Agent. The
Transfer Agent may reduce the amount of a wire redemption payment by its
then-current wire redemption charge. Presently there is no charge. There is no
charge for having payment of redemption requests mailed or sent via the
Automated Clearing House to a designated bank account. For telephone
redemptions, contact SBCL or your Participating Organization.
TELEPHONE PROCEDURES
A change of address may be requested over the telephone or by fax. These
requests will be processed and subject to independent verification at the point
of entry. Telephone and faxed address changes may not be made in conjunction
with a redemption request or a change in Auto Invest/ Auto Withdrawal
instructions. A shareholder that changes their address by phone will have their
account subject to a ten business day escrow hold.
The Distributor, the Transfer Agent, SBCL and the Eureka Funds will not be
liable for any losses, damages, expenses or costs arising out of any telephone
transaction (including purchases, exchanges, and redemptions) effected in
accordance with the Eureka Funds' telephone transaction procedures, upon
instructions reasonably believed to be genuine. The Eureka Funds will employ
procedures designed to provide reasonable assurance that instructions
communicated by telephone are genuine; if these procedures are followed, the
Eureka Funds will not be liable for any losses due to unauthorized or
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fraudulent instructions. These procedures include recording phone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, verifying the account name and a shareholder's account number or
tax identification number and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, investors are unable to effect telephone transactions, Shareholders
may mail redemption requests to the Eureka Funds.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However, to
the greatest extent possible, the Eureka Funds will attempt to honor requests
from Shareholders for next Business Day payments if the request for redemption
is received by the Transfer Agent before the Valuation Time on a Business Day
or, if the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Eureka Funds or the Shareholders of the particular Fund
to sell or liquidate portfolio securities in an amount sufficient to satisfy
requests for payments in that manner. The Money Market Funds will attempt to
honor requests from Shareholders for same day payment upon redemption of Shares
if the request for redemption is received by the Transfer Agent before 4:00 p.m.
Eastern time, on a Business Day or, if the request for redemption is received
after 4:00 p.m. Eastern time, to honor requests for payment on the next Business
Day, unless it would be disadvantageous to the Fund or its Shareholders to sell
or liquidate portfolio securities in an amount sufficient to satisfy requests
for payments in that manner.
In some instances, a Fund may be requested to redeem Shares for which it has
not yet received good payment. Under such circumstances, the Eureka Funds may
delay forwarding the proceeds until payment has been collected for the purchase
of such Shares, which may take up to 15 days or more. To avoid delay in payment
upon redemption, investors should purchase Shares by certified check or by wire
transfer. The Eureka Funds intend to pay cash for all Shares redeemed, but under
abnormal conditions which may make payment in cash unwise, the Eureka Funds may
make payment wholly or partly in portfolio securities at their then current
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Eureka Funds may suspend the
right of redemption or redeem Shares involuntarily if it appears appropriate to
do so in light of the Eureka Funds' responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
Each Fund will be treated as a separate entity for federal income tax
purposes. Each Fund intends to qualify for treatment as a "regulated investment
company" under the Internal Revenue Code of 1986 (the "Code"). If qualified, a
Fund will not have to pay federal taxes on amounts it distributes to
Shareholders. Regulated investment companies are subject to a federal excise tax
if they do not distribute substantially all of their income on a timely basis.
Each Fund intends to avoid paying federal income and excise taxes by timely
distributing substantially all its net investment income and net realized
capital gains.
Dividends received by a Shareholder of a Fund that are derived from such
Fund's investments in U.S. government securities may not be entitled to the
exemption from state and local income taxes that would be available if the
Shareholder had purchased U.S. government securities di-
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rectly. Shareholders are advised to consult their
tax adviser concerning the application of state and local taxes to
distributions received from
a Fund.
Shareholders will be advised at least annually as to the amount and federal
income tax character of distributions made during the year.
The net investment income of each Money Market Fund is declared daily as a
dividend to Shareholders at the close of business on the day of declaration.
Dividends will generally be paid monthly. The Money Market Funds do not expect
to realize any long-term capital gains and, therefore, do not foresee paying any
"capital gains dividends" as described in the Code. However, any such capital
gains will be distributed no more than twice a year after deduction for any
available capital loss carryforward.
The amount of dividends payable with respect to the Trust Shares will exceed
dividends on Class A Shares due to the Distribution and Shareholder Services
Plan fee applicable to Class A Shares.
A dividend on the Shares of the Investment Grade Bond Fund is declared daily
and paid monthly. A dividend on the Shares of the Global Asset Allocation Fund
is declared and paid annually. A dividend on the Shares of the Equity Fund is
declared and paid monthly. Net realized capital gains, if any, are distributed
at least annually to Shareholders of record after deduction for any available
capital loss carry forward.
A Shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional Shares at net asset value as of
the date of payment unless the Shareholder elects to receive such dividends or
distributions in cash. Such election, or any revocation thereof, must be made in
writing to the Eureka Funds, P.O. Box 182792, Columbus, Ohio 43218-2792, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Dividends are paid in cash not
later than seven Business Days after a Shareholder's complete redemption of his
or her Shares. If you elect to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be cancelled and will be held in a non-interest bearing account pending
further instructions from the Shareholder.
Dividends are generally taxable in the taxable year received. However,
dividends declared in October, November or December to Shareholders of record
during such a month and paid during the following January are treated for tax
purposes as if they were received by each Shareholder on December 31 of the year
in which the dividends were declared.
Dividends will generally be taxable to a Shareholder as ordinary income to the
extent of the Shareholder's ratable share of the earnings and profits of a Fund
as determined for tax purposes. Certain dividends paid by the Investment Grade
Bond Fund, the Global Asset Allocation Fund, and the Equity Fund, and
so-designated by the Funds may qualify for the dividends received deduction for
corporate shareholders. Because all of the net investment income of the
remaining Funds is expected to be interest income, it is anticipated that no
distributions from such Funds will qualify for the dividends received deduction.
Distributions of net realized capital gains are taxable to Shareholders as
long-term capital gains regardless of how long the Shareholder has held Shares
in the Fund. Shareholders who are not subject to tax on their income generally
will not have to pay federal income tax on amounts distributed to them.
Dividends that are derived from interest on a Fund's investments in U.S.
government securities may be eligible for exemption from the state and local
taxes of certain jurisdictions, although state and local tax authorities may not
agree with this
18
<PAGE> 21
view. However, distributions of income derived from
repurchase agreements and securities lending transactions generally will not
qualify for exemption from state and local income taxes.
The foregoing is a summary of certain federal, state and local income tax
consequences of investing in a Fund. Shareholders should consult their own tax
advisers concerning the tax consequences of an investment in a Fund.
TAX CONSIDERATIONS RELATING TO THE GLOBAL ASSET ALLOCATION FUND
Dividends and certain interest income earned by the Global Asset Allocation
Fund from foreign securities may be subject to foreign withholding taxes or
other taxes. So long as more than 50% of the value of the Fund's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Fund may elect, for federal income tax purposes, to treat
certain foreign taxes paid by it, including generally any withholding taxes and
other foreign income taxes, as paid by its shareholders. It is possible that the
Global Asset Allocation Fund will make this election in certain years. The
remaining Funds do not expect to be eligible to make this election. If a Fund
makes the election, the amount of such foreign taxes paid by a Fund will be
included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and each shareholder will be entitled
either (a) to credit a proportionate amount of such taxes against a
shareholder's federal income tax liabilities, or (b) if a shareholder itemizes
deductions, to deduct such proportionate amounts from federal taxable income.
Fund transactions in foreign currencies and hedging activities may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in value of the foreign currency concerned. In addition, such
activities will likely produce a difference between book income and taxable
income. This difference may cause a portion of a Fund's income distributions to
constitute a return of capital for tax purposes or require the Fund to make
distributions exceeding book income to qualify as a regulated investment
company for tax purposes.
MANAGEMENT OF EUREKA FUNDS
TRUSTEES
The Board of Trustees of the Eureka Funds has overall responsibility for the
Funds. The Board of Trustees is elected by the Shareholders. There are currently
five Trustees, two of whom are "interested persons" of the Eureka Funds within
the meaning of that term under the 1940 Act. The Trustees, in turn, elect the
officers of the Eureka Funds to supervise its day-to-day operations.
INVESTMENT ADVISER
SBCL serves as Investment Adviser of each Fund. SBCL is a wholly-owned
subsidiary of The Sanwa Bank Limited, of Japan. Its principal offices are
located at 601 South Figueroa Street, Los Angeles, California 90017.
Established in 1972, SBCL provides a full range of personal and business
banking services through a network of more than 100 branches and offices
statewide. As of September 30, 1997, SBCL had approximately $1.45 billion of
assets under management.
Subject to the general supervision of the Board of Trustees and in accordance
with the investment objectives and restrictions of a Fund, SBCL manages the
Funds, makes decisions with respect to, and places orders for, all purchases and
sales of its investment securities, and maintains its records relating to such
purchases and sales.
Under an investment advisory agreement between the Eureka Funds and SBCL, the
fee payable to SBCL by each Fund for investment advisory services is the lesser
of: (a) a fee computed daily and paid monthly at the annual rate of thirty one-
hundredths of one percent (0.30%) of the Prime Money Market Fund's average daily
net assets;
19
<PAGE> 22
twenty one-hundredths of one percent (0.20%) of
the U.S. Treasury Obligations Fund's average daily net assets; sixty
one-hundredths of one percent (0.60%) of the Investment Grade Bond Fund's
average daily net assets; ninety one-hundredths of one percent (0.90%) of the
Global Asset Allocation Fund's average daily net assets; and seventy five
one-hundredths of one percent (0.75%) of the Equity Fund's average daily net
assets, or (b) such fee as may from time to time be agreed upon by the Eureka
Funds and SBCL. The fee agreed to from time to time by the Eureka Funds and SBCL
may be significantly lower than the fee calculated at the annual rate and the
effect of such agreed upon lower fee would be to lower a Fund's expenses and
increase the net income of the Fund during the period when such agreed upon
lower fee is
in effect.
Hal Nachtrieb and David Lampert, both Vice Presidents of SBCL, co-manage the
Investment Grade Bond Fund. They have been with SBCL since 1995 and 1984,
respectively, where they are responsible for the investment management of
approximately $500 million in personal and institutional fixed income assets,
including approximately $100 million in commingled bond funds.
Prior to joining SBCL, Mr. Nachtrieb developed a managed equity and fixed
income funds for Franklin Resources. He also served as vice president for
Continental Bank, and before that, managed the fixed income trading desk at
Imperial Corporation of America. Mr. Nachtrieb began his career as an investment
manager as a mortgage-backed options trader for Drexel Burnham Lambert. Mr.
Nachtrieb earned a master of business administration in finance from the
University of Southern California and a bachelor of science in economics from
Lewis & Clark College in Portland, Oregon.
Most recently, Mr. Lampert was the Deputy Treasurer of SBCL responsible for
all fixed income activities of the Treasury Department. Over the years, his
responsibilities included trading bonds and bond futures, developing and
implementing derivatives strategies for the bank and customers, and managing a
$1.0 billion money market portfolio and the $600 million bond portfolio. Mr.
Lampert graduated from the University of California at Los Angeles with a
bachelor of arts in Business/Economics.
Richard Weiss, Chief Investment Officer and Senior Vice President of SBCL, and
Brian Garbe, Director of Investment Research & Strategy and Vice-President of
SBCL, co-manage the Equity Fund and Global Asset Allocation Fund. They have been
with SBCL since 1994, where they are responsible for the investment management
of approximately $1.6 billion in personal and institutional assets, including
approximately $250 million in commingled equity and international funds.
Mr. Weiss has over 15 years of experience in the investment management
industry. Prior to joining SBCL, Messrs. Weiss and Garbe both were employed by
Vantage Global Advisors where they acted as manager and trader, respectively,
for global asset allocation portfolios. Before that, they were managing director
and investment officer, respectively, at TSA Capital Management, again
responsible for the management and back-office of global investments. Earlier in
his career, Mr. Weiss was a quantitative investment strategist for Paine Webber
in New York, and director of quantitative analysis and systems for Mellon Bank
in Pittsburgh, Pennsylvania.
Mr. Weiss graduated magna cum laude with a master of business administration
in finance and econometrics from the University of Chicago. He also graduated
magna cum laude with a bachelor of science in finance and statistics from The
Wharton School, University of Pennsylvania.
Mr. Garbe earned a master of business administration and a bachelor of science
in applied mathematics from the University of California at Los Angeles.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services, Inc. is the administrator for each Fund and also acts as
the Eureka Funds' principal underwriter and distributor (the "Administrator" or
the "Distributor"), under agreements
20
<PAGE> 23
approved by the Eureka Funds' Board of Trustees. BISYS Fund Services, Inc. is
wholly owned by The BISYS Group, Inc., 150 Clove Road, Little Falls, New Jersey
07424, a publicly owned company engaged in information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of a Fund's administration
and operation. Under a management and administration agreement between the
Eureka Funds and the Administrator, the fee payable by a Fund to the
Administrator for management administration services is the lesser of (a) a fee
computed at the annual rate of twenty one-hundredths of one percent (.20%) of a
Fund's average daily net assets or (b) such fee as may from time to time be
agreed upon by the Eureka Funds and the Administrator. A fee agreed to from time
to time by the Eureka Funds and the Administrator may be significantly lower
than the fee calculated at the annual rate and the effect of such agreed upon
lower fee would be to lower a Fund's expenses and increase the net income of the
Fund during the period when such agreed upon lower fee is in effect.
EXPENSES
SBCL and the Administrator each bear all expenses in connection with the
performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Fund. Each Fund bears the following
expenses relating to its operations: taxes, interest, any brokerage fees and
commissions, fees and travel expenses of the Trustees, Commission fees, state
securities qualification and renewal fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
Shareholders, outside auditing and legal expenses, amortized organizational
expenses, advisory and administration fees, fees and out-of-pocket expenses of
the custodian and the Transfer Agent, fees and out-of-pocket expenses for fund
accounting services, expenses incurred for pricing securities owned by a Fund,
certain insurance premiums, costs of maintenance of a Fund's existence, costs
and expenses of Shareholders' and Trustees' reports and meetings, and any
extraordinary expenses incurred in its operation. As a general matter, expenses
are allocated to the Class A Shares and Trust Shares of a Fund on the basis of
the relative net asset value of each class. At present, the only expenses that
will be borne solely by Class A Shares, other than in accordance with the
relative net asset value of the class, are expenses under the Eureka Funds'
Distribution and Shareholder Services Plan ("Distribution Plan") and a "Services
Plan" which relate only to the Class A Shares.
The organizational expenses of each Fund have been capitalized and are being
amortized in the first five years of each Fund's operations. Such amortization
will reduce the amount of income available for payment as dividends.
DISTRIBUTION PLAN
The Distribution Plan contains a so-called "defensive" provision applicable to
all classes of Shares. Under this defensive provision to the extent that any
payment made to the Administrator, including payment of administration fees,
should be deemed to be indirect financing of any activity primarily intended to
result in the sale of Shares issued by the Eureka Funds within the context of
Rule 12b-1 under the 1940 Act, such payment shall be deemed to be authorized by
the Distribution Plan.
BANKING LAWS
SBCL believes that it possesses the legal authority to perform the investment
advisory services for the Eureka Funds contemplated by its investment advisory
agreement with the Eureka Funds and described in this Prospectus without
violation of applicable banking laws and regulations, and has so represented to
the Eureka Funds. Future changes in federal or state statutes and regulations
relating to permissible activities of banks or bank holding companies and their
subsidiaries and affiliates as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations
could change the manner in which SBCL
21
<PAGE> 24
could continue to perform such services for the Eureka Funds. See "MANAGEMENT OF
EUREKA FUNDS--Glass Steagall Act" in the Statement of Additional Information for
further discussion of applicable banking laws and regulations.
GENERAL INFORMATION
DESCRIPTION OF THE EUREKA FUNDS AND ITS SHARES
The Eureka Funds organized as a Massachusetts business trust on April 7, 1997
named Sanwa Fund, commenced operations on , 1997. There are an
unlimited number of authorized Shares of beneficial interest of the Eureka Funds
which may, without Shareholder approval, be divided into an unlimited number of
series of such Shares, and which are presently divided into five series of
Shares, one for each of the following Funds: the Prime Money Market Fund, the
U.S. Treasury Obligations Fund, the Investment Grade Bond Fund, the Global Asset
Allocation Fund, and the Equity Fund. Each Fund offers to the public two classes
of shares: Class A and Trust Shares. Each Share represents an equal
proportionate interest in a Fund with other Shares of the same series and class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to that Fund as are declared at the discretion of the
Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote per Share (with proportional voting for
fractional Shares) on such matters as Shareholders are entitled to vote.
Shareholders vote in the aggregate and not by series or class on all matters
except (i) when required by the 1940 Act, Shares shall be voted by individual
series, (ii) when the Trustees have determined that the matter affects only the
interests of a particular series or class, and (iii) only the holders of Class A
Shares will be entitled to vote on matters submitted to Shareholder vote with
regard to the Distribution Plan applicable to such class.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Eureka Funds or a
particular Fund means the affirmative vote, at a meeting of Shareholders duly
called, of the lesser of (a) 67% or more of the votes of Shareholders of the
Eureka Funds or that particular Fund present at such meeting at which the
holders of more than 50% of the votes attributable to the Shareholders of record
of the Eureka Funds or such Fund are represented in person or by proxy, or (b)
the holders of more than 50% of the outstanding votes of Shareholders of the
Eureka Funds or such Fund.
Overall responsibility for the management of the Eureka Funds is vested in the
Board of Trustees. See "MANAGEMENT OF EUREKA FUNDS-- Trustees of the Eureka
Funds." Individual Trustees are elected by the Shareholders and may be removed
by the Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Eureka Funds and Massachusetts law. See "ADDITIONAL INFORMATION--
Miscellaneous" in the Statement of Additional Information for further
information.
Although the Eureka Funds is not required to hold annual meetings of
Shareholders, Shareholders holding at least 10% of the Eureka Funds' outstanding
Shares have the right to call a meeting to elect or remove one or more of the
Trustees of the Eureka Funds. Shareholder inquiries should be directed to the
Secretary of the Eureka Funds at 3435 Stelzer Road, Columbus, Ohio 43219.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
The Bank of New York, serves as Custodian for the Eureka Funds.
BISYS Fund Services, Inc. serves as transfer agent for and provides fund
accounting services to the Eureka Funds.
22
<PAGE> 25
OTHER CLASSES OF SHARES
In addition to Trust Shares, the Eureka Funds also offer Class A Shares of
each Fund. Class A Shares are offered to the general public at net asset value
and are subject to a Distribution Plan fee and Service Plan fee.
PERFORMANCE INFORMATION
GENERAL. From time to time, a Money Market Fund's annualized "yield" and
"effective yield" and total return for Trust Shares may be presented in
advertisements, sales literature and shareholder reports. The "yield" of a Money
Market Fund is based upon the income earned by the Fund over a seven-day period
and then annualized, i.e., the income earned in the period is assumed to be
earned every seven days over a 52-week period and is stated as a percentage of
the investment. The "effective yield" of a Money Market Fund is calculated
similarly but when annualized, the income earned by the investment is assumed to
be reinvested in Shares of the Eureka Funds and thus compounded in the course of
a 52-week period. The effective yield will be higher than the yield because of
the compounding effect of the assumed reinvestment.
Total return is calculated for the past year and the period since the
establishment of each Money Market Fund. Average annual total return is measured
by comparing the value of an investment in a Fund at the beginning of the
relevant period to the redemption value of the investment at the end of the
period (assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized.
From time to time performance information of the Investment Grade Bond Fund,
the Global Asset Allocation Fund, and the Equity Fund, showing its average
annual total return, aggregate total return, and/or yield may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return will be calculated for the period since
the establishment of a Fund. Average annual total return is measured by
comparing the value of an investment in a Fund at the beginning of the relevant
period to the redemption value of an investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized. Yield will be
computed by dividing the net investment income per Share for the Investment
Grade Bond Fund, the Global Asset Allocation Fund, and the Equity Fund earned
during a recent 30-day period by the Fund's per Share maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last day of the period and annualizing the results.
The Investment Grade Bond Fund, the Global Asset Allocation Fund, and the
Equity Fund may also calculate a distribution rate. Distribution rates will be
computed by dividing the distribution per Share of a class made by a Fund over a
twelve-month period by the maximum offering price per Share. The distribution
rate includes both income and capital gain dividends and does not reflect
unrealized gains or losses. The calculation of income in the distribution rate
includes both income and capital gain dividends and does not reflect unrealized
gains or losses, although a Fund may also present a distribution rate excluding
the effect of capital gains. The distribution rate differs from the yield,
because it includes capital items which are often non-recurring in nature, and
may include returns of principal, whereas yield does not include such items. The
Funds do not intend to publish distribution rates in Fund advertisements but may
publish such rates in supplemental sales literature. Distribution rates may also
be presented excluding the effect of a sales charge, if any.
Yield, effective yield, total return and distribution rate will be calculated
separately for each Class of Shares. Because Trust Shares are not subject to
Distribution Plan fees or Service Plan fees, the yield
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<PAGE> 26
and total return for Trust Shares will be higher than that of the Class A Shares
for the same period.
Investors may also judge the performance of a Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc., IBC/Donoghue's MONEY
FUND REPORT and Ibbotson Associates, Inc. References may also be made to indices
or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, American Banker, Fortune, Institutional
Investor, Ibbotson Associates, Inc., Morningstar, Inc., CDA/Weisenberger,
Pension and Investments, U.S.A. Today and local newspapers. In addition to
performance information, general information about the Funds that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to Shareholders.
Information about the performance of a Fund is based on a Fund's record up to
a certain date and is not intended to indicate future performance. Yields and
total returns of a Fund will fluctuate. Any fees charged by the Participating
Organizations to their customers in connection with investment in a Fund are not
reflected in the Eureka Funds' performance information.
Further information about the performance of a Fund is contained in that
Fund's annual report to Shareholders, which may be obtained without charge by
contacting the Eureka Funds at the address below.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
investment operations of their Fund(s) and annual financial statements audited
by independent public accountants.
Inquiries regarding the Eureka Funds may be directed in writing to the Eureka
Funds at the following address: The Eureka Funds, P.O. Box 182792, Columbus,
Ohio 43218-2792.
24
<PAGE> 27
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 28
INVESTMENT ADVISER
SANWA BANK CALIFORNIA
Investment Management Department
601 S. Figueroa Street
Los Angeles, California 90017
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005
TRANSFER AGENT
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
AUDITORS
Ernst & Young LLP
10 West Broad Street
Columbus, Ohio 43215
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary........................ 2
Fee Table................................. 4
Investment Objective and Policies......... 5
Valuation of Shares....................... 12
How to Purchase and Redeem Shares......... 13
Dividends and Taxes....................... 17
Management of Eureka Funds................ 19
General Information....................... 22
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE EUREKA
FUNDS OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
EUREKA FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
MONEY MARKET FUNDS
------------------------
Eureka Prime Money Market Fund
Eureka U.S. Treasury Obligations Fund
BOND FUND
------------------------
Eureka Investment Grade Bond Fund
BALANCED FUND
------------------------
Eureka Global Asset Allocation Fund
STOCK FUND
------------------------
Eureka Equity Fund
TRUST SHARES
SANWA BANK CALIFORNIA
INVESTMENT ADVISER
BISYS FUND SERVICES, INC.
ADMINISTRATOR
AND DISTRIBUTOR
PROSPECTUS DATED
OCTOBER 31, 1997
<PAGE> 29
CROSS REFERENCE SHEET
---------------------
PROSPECTUS FOR EUREKA FUNDS
---------------------------
CLASS A SHARES
--------------
<TABLE>
<CAPTION>
Part A Item Prospectus Caption
- ----------- ------------------
<S> <C>
Cover Page.................................................... Cover Page
Synopsis...................................................... Prospectus Summary; Fee Table
Condensed Financial Information............................... Inapplicable
General Description
of Registrant.............................................. Prospectus Summary; Investment
Objective and Policies; General
Information - Description of the
Eureka Funds and Its Shares
Management of Eureka Funds.................................... Management of Eureka Funds;
General Information
Management's Discussion of
Fund Performance............................................ Inapplicable
Capital Stock and
Other Securities........................................... Eureka Funds; How to
Purchase and Redeem Shares;
Dividends and Taxes; General
Information - Description of the
Eureka Funds and Its Shares;
General Information - Miscellaneous
Purchase of Securities
Being Offered.............................................. Valuation of Shares; How to Purchase
and Redeem Shares
Redemption or Repurchase...................................... How to Purchase and Redeem Shares
Pending Legal Proceedings..................................... Inapplicable
</TABLE>
<PAGE> 30
EUREKA FUNDS
<TABLE>
<S> <C>
For current yield, purchase,
and redemption information,
3435 Stelzer Road call
Columbus, Ohio 43219 888-890-8121
Investment Adviser: Sanwa Bank California TDD/TTY call (800) 300-8893
</TABLE>
THE EUREKA FUNDS is an open-end management investment company consisting of
five separate investment funds (each a "Fund," and collectively, the "Funds").
Each Fund offers multiple classes of units of beneficial interest ("Shares").
THE EUREKA PRIME MONEY MARKET FUND (the "Prime Money Market Fund") seeks as
high a level of current income as is consistent with maintaining liquidity and
stability of principal.
THE EUREKA U.S. TREASURY OBLIGATIONS FUND (the "U.S. Treasury Obligations
Fund"), seeks current income consistent with liquidity and stability of
principal. The Fund intends to invest exclusively in short-term obligations
issued or guaranteed by the U.S. Treasury and repurchase agreements fully
collateralized by U.S. Treasury securities.
------------------------
AN INVESTMENT IN THE PRIME MONEY MARKET FUND OR THE U.S. TREASURY OBLIGATIONS
FUND (TOGETHER, THE "MONEY MARKET FUNDS") IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET FUNDS WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
------------------------
THE EUREKA INVESTMENT GRADE BOND FUND (the "Investment Grade Bond Fund")
seeks a high level of income, consistent with preservation of capital.
THE EUREKA GLOBAL ASSET ALLOCATION FUND (the "Global Asset Allocation Fund")
seeks a balance of income and long-term capital appreciation. The Fund intends
to invest in a mix of U.S. and international stocks, bonds, and cash equivalents
using a disciplined asset allocation approach.
THE EUREKA EQUITY FUND (the "Equity Fund") seeks long-term capital growth.
The Fund intends to invest in the common stocks of corporations representing a
broad cross section of the U.S. economy. The Fund expects to have a level of
risk commensurate with that represented by a broadly diversified portfolio of
U.S. common stocks, such as the Standard & Poor's 500 Index. There can be no
assurance that the Fund's investment performance will meet or exceed that of the
S&P 500 Index.
This Prospectus relates to the Class A Shares of the Eureka Funds, which are
offered to the general public. Through a separate prospectus, the Eureka Funds
also offers Trust Shares to Sanwa Bank California and its affiliates and other
financial service providers approved by the Distributor for the investment of
funds for which they act in a fiduciary, advisory, agency, custodial (other than
for individual retirement accounts) or similar capacity. A Statement of
Additional Information, dated October 31, 1997 (as may be amended from time to
time), has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Statement of Additional Information and
the prospectus relating to the Trust Shares are available without charge by
writing or by calling the Eureka Funds at the address or telephone number shown
above.
This Prospectus sets forth concisely the information an investor should know
before investing and should be read carefully and retained for future reference.
------------------------
SHARES OF THE EUREKA FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, SANWA BANK CALIFORNIA, ANY OF ITS AFFILIATES, OR ANY OTHER BANK.
SUCH SHARES ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THE EUREKA FUNDS INVOLVES INVESTMENT RISKS
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Prospectus is October 31, 1997.
<PAGE> 31
PROSPECTUS SUMMARY
THE EUREKA FUNDS Eureka Funds, a Massachusetts business trust, is a
diversified open-end management investment company
which currently consists of five separately managed
Funds. Each Fund offers to the public two classes
of Shares: Class A and Trust Class. This prospectus
relates to only the Class A Shares.
INVESTMENT OBJECTIVE THE PRIME MONEY MARKET FUND seeks as high a level
of current income as is consistent with maintaining
liquidity and stability of principal.
THE U.S. TREASURY OBLIGATIONS FUND seeks current
income consistent with liquidity and stability of
principal.
THE INVESTMENT GRADE BOND FUND seeks a high level
of income, consistent with preservation of capital.
THE GLOBAL ASSET ALLOCATION FUND seeks a balance of
income and long-term capital appreciation.
THE EQUITY FUND seeks long-term capital growth.
INVESTMENT RISKS There can be no assurance that the Money Market
Funds will be able to maintain a stable net asset
value. The other Funds' net asset value and each
Fund's performance may vary daily, reflecting
fluctuations in the market value of its portfolio
holdings, interest rate levels, and market
conditions. The Investment Grade Bond Fund is
primarily subject to the risks of a potential for
decline in the market value of bonds due to
interest rate changes or the ability of an issuer
to meet its obligations. The Global Asset
Allocation Fund and the Equity Fund are primarily
exposed to the risk that stock prices will decline
over short or even extended periods. Foreign
securities, which the Prime Money Market Fund,
Investment Grade Bond Fund, and Global Asset
Allocation Fund may invest in, involve risks not
associated with domestic investing. Foreign
securities markets are not always as efficient as
those in the United States and are often less
liquid and more volatile. See "Investment Practices
and Securities" for a discussion of the Funds'
investments and the risks associated with investing
in the Funds.
OFFERING PRICE The public offering price of the Prime Money Market
Fund and the U.S. Treasury Obligations Fund is
equal to that Fund's net asset value per Class A
Share, which each Fund will seek to maintain at
$1.00.
The public offering price of the Investment Grade
Bond Fund, the Global Asset Allocation Fund, and
the Equity Fund is equal to that Fund's net asset
value per Class A Share. See "HOW TO PURCHASE AND
REDEEM SHARES--Purchases of Class A Shares."
MAXIMUM PURCHASE For Class A Shares there is no maximum purchase.
See "HOW TO PURCHASE AND REDEEM SHARES--Purchases
of Class A Shares."
2
<PAGE> 32
MINIMUM PURCHASE For Class A Shares there is a $1,000 minimum
initial investment, or a $50 minimum initial
investment if investing through the Eureka Funds'
Automatic Investment Plan, and a $50 minimum
investment for subsequent purchases. See "HOW TO
PURCHASE AND REDEEM SHARES--Purchases of Class A
Shares."
INVESTMENT ADVISER Sanwa Bank California ("SBCL"), Los Angeles,
California.
DIVIDENDS The Prime Money Market Fund, the U.S. Treasury
Obligations Fund, and the Investment Grade Bond
Fund declare dividends daily and pay such dividends
monthly. The Global Asset Allocation Fund declares
and pays dividends annually. The Equity Fund
declares and pays dividends monthly.
DISTRIBUTOR BISYS Fund Services, Inc., Columbus, Ohio.
3
<PAGE> 33
FEE TABLE
The following tables are intended to assist investors in understanding the
expenses associated with investing in Class A Shares of the Funds.
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
----------- ----------- ----------- ----------- -----------
CLASS A CLASS A CLASS A CLASS A CLASS A
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load on Purchases.................. None None None None None
Maximum Sales Load on Reinvested Dividends....... None None None None None
Maximum Deferred Sales Load...................... None None None None None
Redemption Fees(2)............................... None None None None None
Exchange Fee..................................... None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of net assets)(3)
Management Fees (after voluntary fee
reductions).................................... 0.20% 0.10% 0.50% 0.80% 0.65%
12b-1 Fee........................................ 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses(3,4)(after voluntary fee
reductions).................................... 0.35% 0.36% 0.40% 0.64% 0.37%
--- --- --- --- ---
Total Fund Operating Expenses (after voluntary
fee reductions)................................ 0.80% 0.71% 1.15% 1.69% 1.27%
=== === === === ===
EXAMPLE:
You would pay the following expenses on a $1,000
investment in Class A Shares of the Funds, assuming
(1) 5% annual return and (2) redemption at the end of
each time period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Prime Money Market Fund...................................................................... $ 8 $26
U.S. Treasury Obligations Fund............................................................... $ 7 $23
Investment Grade Bond Fund................................................................... $ 12 $37
Global Asset Allocation Fund................................................................. $ 17 $53
Equity Fund.................................................................................. $ 13 $40
</TABLE>
- ------------
(1) A Participating Organization or Bank (as defined in this Prospectus) may
charge a Customer's (as defined in this Prospectus) account fees for
automatic investments, exchanges, and other investment management services
provided in connection with investment in Class A Shares of a Fund. See "HOW
TO PURCHASE AND REDEEM SHARES--Purchases of Class A Shares" and "HOW TO
PURCHASE AND REDEEM SHARES--Exchange Privilege."
(2) A wire redemption charge may be deducted from the amount of a wire
redemption payment made at the request of a shareholder. See "HOW TO
PURCHASE AND REDEEM SHARES--Redemption by Telephone."
(3) SBCL has agreed to voluntarily reduce the amount of its investment advisory
fee through the end of the Fund's initial fiscal year. Certain other fees
will also be voluntarily reduced. Absent the voluntary reduction of
investment advisory fees and other expenses, Management Fees, Other Expenses
and Total Operating Expenses as a percentage of average daily net assets for
Class A Shares would be 0.30%, 0.64% and 1.19%, respectively, for the Prime
Money Market Fund; 0.20%, 0.65% and 1.10%, respectively, for the U.S.
Treasury Obligations Fund; 0.60%, 0.65% and 1.50%, respectively, for the
Investment Grade Bond Fund; 0.90%, 0.89% and 2.04%, respectively, for the
Global Asset Allocation Fund; and 0.75%, 0.62% and 1.62%, respectively, for
the Equity Fund.
(4) "Other Expenses" are based on estimated amounts for the current fiscal year.
These tables are intended to assist investors in understanding the various
costs and expenses associated with investing in the Funds. See "MANAGEMENT OF
THE EUREKA FUNDS" for a more complete discussion of annual operating expenses of
each Fund. THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE
FUNDS' ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Long-term shareholders of Class A Shares may pay more than the equivalent of
the maximum front-end sales charges otherwise permitted by NASD Rules.
4
<PAGE> 34
INVESTMENT OBJECTIVES AND POLICIES
MONEY MARKET FUNDS
Each Money Market Fund will endeavor to achieve its investment objective by
investing in a portfolio of high-quality money market instruments which complies
with the diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"). All instruments in which the
Money Market Funds invest will be deemed to have maturities of 397 days or less.
The average dollar weighted maturity of each Money Market Fund's portfolio will
not exceed 90 days. See "VALUATION OF SHARES" and the Statement of Additional
Information for a further explanation of the amortized cost valuation method.
All securities acquired by the Money Market Funds will be determined at the
time of purchase, under guidelines established by the Eureka Funds' Board of
Trustees, to present minimal credit risks. Under the guidelines adopted by the
Board of Trustees and in accordance with Rule 2a-7 under the 1940 Act, SBCL may
be required to dispose of an obligation held in a Fund's portfolio if there is
an indication that the instrument's credit quality has diminished, such as where
a nationally recognized statistical ratings organization ("NRSRO") downgrades an
obligation to below the second highest rating category or in the event of a
default relating to the financial condition of the issuer.
PRIME MONEY MARKET FUND
The investment objective of the Prime Money Market Fund is to seek as high a
level of current income as is consistent with maintaining liquidity and
stability of principal. The Fund will invest in certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements, reverse
repurchase agreements, other money market securities, short-term corporate,
state, and municipal obligations that are rated in the top two tiers by an NRSRO
or, if unrated, are of comparable quality. The Fund also invests in securities
whose interest and principal payments are backed by the full faith and credit of
the U.S. government or by an agency of the U.S. government (certain agency
securities are not backed by the full faith and credit of the U.S. government).
U.S. TREASURY OBLIGATIONS FUND
The investment objective of the U.S. Treasury Obligations Fund is to seek
current income consistent with liquidity and stability of principal. Under
normal market conditions, the Fund will invest exclusively in short-term
obligations issued or guaranteed by the U.S. Treasury and repurchase agreements
fully collateralized by U.S. Treasury securities.
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund seeks a high level of income, consistent with
preservation of capital. To achieve this objective, the Fund intends to invest
in a broad range of fixed income securities, including U.S. Treasury securities
(bonds, notes, and bills), U.S. agency securities, mortgage related securities,
corporate securities, preferred stocks, depository institution obligations, and
repurchase agreements. Under normal market conditions, the Fund will invest at
least 80% of its net assets in bonds (i.e., debt securities) which are
investment grade securities, as determined by NRSRO ratings, or if unrated, as
determined by SBCL to be of comparable quality.
The Fund will invest in a varying combination of cash, U.S. Treasury
securities, U.S. agency securities, mortgage related securities, and corporate
securities which are all issued in U.S. dollars. In pursuing its investment
objective, the Fund expects that its portfolio will be characterized by
investment risk that is similar to that of a theoretical broadly diversified
domestic investment grade bond portfolio, such as a portfolio structured to
match the Salomon Broad Investment Grade Index or the Lehman Aggregate Index.
SBCL uses its proprietary, quantitative fixed income security selection
strategy to determine the optimal combination of investments in the portfolio.
5
<PAGE> 35
SBCL will use a variety of quantitative investment models and risk management
systems to identify the optimal interest rate, credit, and convexity exposure at
any point in time. SBCL seeks the fixed income sectors and/or securities with
high expected relative return premiums, adjusted for risk. Fundamental
valuation, macroeconomic, technical and risk measures are all employed to
determine the expected relative return premium for each sector and/or security.
Once the attractiveness of the various investment sector and individual security
alternatives is determined, the portfolio is constructed so as to overweight
those sectors and/or securities with the most-favorable prospects, according to
the current quantitative analysis.
In order to execute its strategy in an efficient manner, SBCL may utilize bond
index futures contracts in representing various yield curve sectors. The Fund
will use futures contracts to provide an efficient means of achieving exposure
to the fixed income markets. Futures contracts may be used to provide liquidity,
gain broad market exposure, and hedge unwanted interest rate exposure. SBCL will
not use futures to leverage the Fund's holdings.
The Fund may invest up to 20% of its net assets in non-investment grade debt
securities, preferred stocks and convertible securities. In the event that a
security held by the Fund is downgraded, the Fund may continue to hold such
security until such time as SBCL deems it to be advantageous to dispose of the
security.
The Fund may hold securities of foreign issuers, provided such securities are
denominated in U.S. dollars. The Fund may also invest in bond (interest rate)
options to a limited extent. See "Investment Objective and Policies--Specific
Investment Policies."
GLOBAL ASSET ALLOCATION FUND
The investment objective of the Global Asset Allocation Fund is to seek a
balance of income and long-term capital appreciation. Through the use of a
disciplined asset allocation approach, the Fund intends to invest in, and assume
a level of risk commensurate with, a globally diversified portfolio of stocks,
bonds, and cash equivalents. By systematically diversifying across countries,
currencies, and asset classes (stocks and bonds), the Fund pursues its capital
appreciation goals while seeking to control portfolio risk. Under normal market
conditions, the Fund will invest at least 25% of its net assets in fixed income
securities.
The Fund will invest in a varying combination of stocks, bonds, and cash
selected primarily from major markets such as: the United States, Japan, the
U.K., Germany, France, Switzerland, Spain, Canada and Australia. The Fund may
also invest in other markets, including emerging markets.
Under normal circumstances, at least 65% of the Fund's net assets will be
invested in securities representing at least three different countries,
including the United States.
SBCL uses its proprietary, quantitative global tactical asset allocation,
global currency allocation, and global sector rotation strategies to determine
the optimal combination of investments in the portfolio. SBCL will use a variety
of quantitative investment models to identify the country, sector, and asset
classes deemed most attractive. SBCL seeks those sectors, asset classes,
countries, and currencies with a high expected relative return premium, adjusted
for risk. Fundamental valuation, macroeconomic, technical, and risk measures are
all employed to determine the expected relative return premium for each country,
currency, asset class, and sector. Once the relative attractiveness of the
various investment class alternatives is determined, the portfolio is
constructed so as to overweight those countries, currencies, sectors, and asset
classes with the most favorable prospects, according to the current quantitative
analysis.
In evaluating equity exposure, SBCL attempts to assess the relative value of
each country's market in the aggregate. SBCL may overweight the Fund's
investments in a few selected countries and/or asset classes. The Fund typically
will not deviate by more than 20% from the market capitalization weights of the
respective individual equity markets. Relative market capitalization of each
equity market is determined by that market's representation in the
6
<PAGE> 36
Salomon Brothers World Equity Primary Market
Europe & Pacific Basin Index (PMI EPAC) or the Morgan Stanley Capital
International Europe, Australasia, and the Far East Index (MSCI EAFE). For
example, if the Japanese equity market represents 30% of an index, then the Fund
will typically invest not less than 10% nor more than 50% of its assets in the
Japanese equity market.
Investments will also include direct investments in short-term or long-term
government bonds, and U.S. and foreign cash equivalents. Bonds in the Fund's
portfolio are expected to range in maturity from one to thirty years.
In order to execute its strategy in an efficient manner, SBCL may utilize
equity index, bond index, and currency futures contracts in the various
countries. The Fund will use futures contracts to provide an efficient means of
achieving broad market exposure to the stock, fixed income and currency markets
of a particular country, to provide liquidity, and to facilitate asset
allocation shifts. Currency futures provide an efficient vehicle for hedging
foreign exchange exposure. By investing in a stock index futures contract the
Fund is exposed to an index of stocks without buying each underlying security in
that index. SBCL will not use futures to leverage the Fund's holdings. See
"Options and Futures" in the Statement of Additional Information for a more
detailed discussion of the risks associated with investment in futures
contracts.
EQUITY FUND
The Equity Fund's investment objective is to seek long-term capital growth.
The Fund intends to invest in the common stocks of corporations from a broad
cross section of the U.S. economy. The Fund expects to assume a level of risk
commensurate with that represented by a broadly diversified portfolio of U.S.
common stocks, such as that measured by the S&P 500 Index. Under normal market
conditions, the Fund will invest at least 65% of its net assets in common
stocks.
Equity investments are chosen based upon SBCL's proprietary,
quantitatively-disciplined stock selection models. A combination of valuation,
growth, technical, and risk measures are used to rank a universe of
approximately 1,000 U.S. equity issues. The issues assigned the most attractive
overall composite ratings are those which are deemed to have greater potential
for price appreciation over a short-to-intermediate term horizon. The portfolio
is then constructed so that the aggregate investment characteristics of the Fund
are similar to those of the S&P 500 Index. These characteristics include such
measures as economic sector diversification, P/E ratio, dividend yield, and
market "beta" (or sensitivity). However, while maintaining aggregate investment
characteristics similar to those of the S&P 500 Index, the Fund seeks to invest
in individual common stocks--including stocks which may not be part of that
Index--which SBCL believes hold a greater potential for price appreciation.
There can be no assurance that the Fund's investment performance will meet or
exceed that of the S&P 500 Index.
Although the Fund normally intends to be fully invested in common stocks, it
may invest temporarily in certain short-term fixed income securities. Such
securities may be used to invest uncommitted cash balances or to maintain
liquidity in order to meet shareholder redemptions.
The Fund may also utilize equity index futures for the dual purpose of
providing an adequate level of liquidity to the Fund and ensuring that cash
balances achieve equity-like returns. This "equitization" of short-term cash
balances will assist the Fund to meet its investment objective. By investing in
a stock index futures contract the Fund is exposed to an index of stocks without
buying each underlying security in that index. Under no circumstances will the
market exposure of futures contracts exceed 30% of the Fund's net assets. SBCL
will not use futures to leverage the Fund's holdings. See "Options and Futures"
in the Statement of Additional Information for a more detailed discussion of the
risks associated with investments in futures contracts.
7
<PAGE> 37
ALL FUNDS
The investment objective of each Fund is fundamental and may not be changed
without the vote of a majority of the outstanding Shares of the Fund (as defined
below under "GENERAL INFORMATION--Miscellaneous"). There can be no assurance
that a Fund will achieve its investment objective.
SPECIFIC INVESTMENT POLICIES
The Funds invest in a variety of securities and employ a number of investment
practices. Each security and investment practice involves certain risks. This
table shows the securities and investment practices utilized by the Funds and
the risks inherent in their use. For a more complete discussion of each
instrument and its attendant risks, consult the Funds' Statement of Additional
Information.
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES AND SECURITIES
ASSET BACKED SECURITIES. Securities secured by company
receivables, home equity loans, truck and auto loans,
leases, credit card receivables and other securities
backed by receivables or assets. Credit, interest rate,
opportunity and pre-payment risks. ...................... x/ -- x/ 35 35
BANKERS' ACCEPTANCES. Bills of exchange or time drafts
drawn on and accepted by a commercial bank. Credit
risk. ................................................... 25 -- 35+ 35+ 35+
BORROWINGS.(1) The borrowing of money from banks or
through reverse repurchase agreements. Leverage and
credit risks. ........................................... 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
CERTIFICATES OF DEPOSIT. Negotiable instruments with a
stated maturity. Credit and liquidity risks. ............ x/ -- 35+ 35+ 35+
COMMERCIAL BONDS. Debt securities issued by
corporations. Credit and interest rate risk. ............ x/ -- x/ x/ 35
COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. Short-
term promissory notes or other obligations issued by
corporations and other entities. Credit risk. ........... x/ -- 35+ 35+ 35+
COMMON STOCK. Shares of ownership of a company. Market
risk..................................................... -- -- -- x/ x/
CONVERTIBLE SECURITIES. Bonds or preferred stock that
convert to common stock. Credit, interest rate and market
risks. .................................................. -- -- x/ x/ x/
CORPORATE BONDS. Debt securities issued by corporations.
Credit and interest rate risks. ......................... x/ -- x/ x/ 35
EMERGING MARKET SECURITIES. Securities of countries with
emerging economies or securities markets. ............... -- -- -- 15 --
Currency, information, liquidity, market and political
risks.
FOREIGN SECURITIES.
- - Stocks and bonds of foreign issuers.................... -- -- 35 x/ 35
- - American depository receipts, European depository
receipts, global depository receipts and other similar
global instruments..................................... x/ -- -- x/ 35
Currency, liquidity, information, market, natural event
and political risks.
FORWARD COMMITMENTS. The purchase or sale of a security
with payment and delivery scheduled for a future time.
Leverage, market and opportunity risks................... x/ x/ x/ x/ x/
FORWARD FOREIGN CURRENCY EXCHANGE
TRANSACTIONS. Contractual agreement to purchase or sell
one specified currency for another currency at a
specified future date and price. Credit, correlation,
currency, information, leverage, liquidity, management,
market, opportunity and political risks.................. -- -- -- 50 --
ILLIQUID SECURITIES.(3) Securities which may be
difficult to sell at an acceptable price. Liquidity,
market and valuation risks............................... 10 -- 15 15 15
</TABLE>
8
<PAGE> 38
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT COMPANY SECURITIES. Shares of other mutual
funds. SBCL and BISYS Fund Services, Inc. will reduce
certain fees when investing in funds for which it serves
as investment adviser or administrator. (Investments in
any one fund will not exceed 5% of total assets.
Investments in all funds will not exceed 10% of total
assets.)
- - Money market mutual funds.............................. 10 10 10 10 10
- - Non-money market mutual funds.......................... -- -- -- 10 --
MANAGEMENT AND MARKET RISKS.
MORTGAGE BACKED SECURITIES.(2) Debt obligations secured
by real estate loans and pools of loans, including such
securities as collateralized mortgage obligations, which
are structured pools of mortgage pass through
certificates or mortgage loans, real estate investment
conduits, and stripped mortgage backed securities.
Mortgage backed securities may have greater price and
yield volatility than traditional fixed-income securities
and their prepayment sensitivity may range from
relatively low to relatively high. Credit, interest rate,
opportunity and pre-payment risks. ...................... -- -- x/ 35 35
MORTGAGE DOLLAR ROLLS. A transaction in which a fund
sells securities for delivery in a current month and
simultaneously contracts with the same party to
repurchase similar but not identical securities on a
specified future date. Interest rate, management and
market risks. ........................................... -- -- x/ x/ x/
MUNICIPAL OBLIGATIONS. Securities issued by a state or
political subdivision to obtain funds for various public
purposes. Municipal obligations include participation
certificates in leases, installment purchase contracts
and conditional sales contracts. Credit, liquidity,
political and tax risks. ................................ x/ -- x/ -- --
OPTIONS AND FUTURES.(1) Contracts involving the right or
obligation to deliver or receive assets or money
depending upon the performance of one or more assets or
an economic index. Currency, correlation, credit,
interest rate, leverage, liquidity, opportunity and
market risks. ........................................... -- -- x/ x/ x/
PREFERRED STOCK. A class of stock that generally pays a
dividend at a specified rate and has preference over
common stock in the payment of dividends and liquidation.
Market risk. ............................................ -- -- 30 x/ x/
REPURCHASE AGREEMENTS.(1) The purchase of a security and
the simultaneous commitment to sell it back at an agreed
upon price. Credit, market and leverage risks. .......... x/ x/ x/ x/ x/
REVERSE REPURCHASE AGREEMENTS.(1, 4) The sale of a
security and the simultaneous commitment to buy it back
at an agreed upon price. Credit, leverage and market
risks. .................................................. x/ x/ x/ x/ x/
RESTRICTED SECURITIES.(5) Securities not registered
under the Securities Act of 1933. Market and valuation
risks. .................................................. 10 -- x/ x/ x/
RIGHTS AND WARRANTS. A contract issued by a corporation
enabling the owner to subscribe to and purchase a
specified number of shares of the corporation at a
specified price during a specified period of time. Market
and valuation risks. .................................... -- -- x/ x/ x/
SECURITIES LENDING.(1) The lending of securities to
financial institutions, which provide cash or government
securities as collateral. Credit risk. .................. 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
SHORT-TERM TRADING. The sale of a security soon after
its purchase. A portfolio engaging in such trading will
have higher turnover and transaction expenses. Market
risk. ................................................... -- -- x/ x/ x/
</TABLE>
9
<PAGE> 39
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
SWAPS, CAPS AND FLOORS.(5) Swaps involve the exchange of
obligations by two parties. Caps and floors entitle a
purchaser to a principal amount from the seller of the
cap or floor to the extent that a specified index exceeds
or falls below a predetermined interest rate or amount.
Correlation, credit, interest rate, liquidity,
management, market and opportunity risks. ............... -- -- x/ x/ x/
TIME DEPOSITS. Non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Liquidity risk. ... x/ -- 35+ 35+ 35+
U.S. GOVERNMENT SECURITIES. Short-term debt instruments
issued or guaranteed by the U.S. Treasury or by an agency
or instrumentalities of the U.S. government. Credit
risk. ................................................... x/ x/ x/ x/ 35+
VARIABLE AND FLOATING RATE INSTRUMENTS. Obligations with
a yield that is reset on a periodic basis and loosely
correlated to changes in money market interest rates,
including variable and floating rate notes and bonds.
Credit, interest rate and liquidity risks. .............. x/ x/ x/ x/ --
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. The purchase
or sale of securities for delivery at a future date.
Leverage, market and opportunity risks. ................. x/ x/ x/ x/ x/
</TABLE>
- ---------------
# Percent of total assets under normal market conditions
x/ No policy limitation on usage
- -- Not permitted
+ For temporary defensive purposes may constitute 100 percent of total assets
(1) Each Fund has a fundamental investment policy regarding these practices or
securities, as set forth in the Statement of Additional Information, which
may in some cases be less restrictive than the operating policy set forth in
the chart.
(2) The Money Market Funds may invest in these securities only if consistent
with their objectives and Rule 2a-7.
(3) Each Fund's liquidity limit is calculated as a percentage of its net
assets.
(4) Reverse repurchase agreements would also be subject to a Fund's policy on
borrowings.
(5) Relative to other securities, these securities are more likely to be deemed
illiquid and, therefore, may be subject to the restrictions on illiquid
securities.
10
<PAGE> 40
TYPES OF INVESTMENT RISK
CORRELATION RISK. The risk that changes in the value of a hedging instrument
will not match those of the asset being hedged (hedging is the use of one
investment to offset the effects of another investment). Incomplete correlation
can result in unanticipated risks and volatility.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK. The risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses.
INFORMATION RISK. The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK. The risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates typically
causes a fall in values, while a fall in rates typically causes a rise in
values.
LEVERAGE RISK. Associated with securities or practices (such as borrowing)
that multiply small index or market movements into large changes in value.
- HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. There can be no assurance that a Fund's hedging
transactions will be effective.
- SPECULATIVE. To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that the seller would like. The
seller may have to lower the price, sell other securities instead or forego an
investment opportunity, any of which could have a negative effect on fund
management or performance.
MANAGEMENT RISK. The risk that a strategy used by a fund's management may
fail to produce the intended result. This risk is common to all mutual funds.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than it
was worth at an earlier time. Market risk may affect a single issuer, industry,
sector of the economy or the market as a whole. Common to all stocks and bonds
and the mutual funds that invest in them.
NATURAL EVENT RISK. The risk of losses attributable to natural disasters,
crop failures and similar events.
OPPORTUNITY RISK. The risk of foregoing an investment opportunity because the
assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK. The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
There are also risks particular to investing in foreign securities, including
higher transaction costs, delayed settlements, currency controls and adverse
economic developments.
PRE-PAYMENT RISK. Early repayment of principal and interest will effect the
rate of return on mortgage-backed securities and may result in
11
<PAGE> 41
greater price and yield volatility and possible investment losses. When mortgage
obligations are pre-paid, a Fund may have to reinvest in securities with a lower
yield. During periods of declining interest rates, prepayment rates can be
expected to accelerate. Under certain interest rate and prepayment rate
scenarios, a Fund may fail to recoup any premium paid on mortgage-related
securities notwithstanding a direct or indirect governmental or agency
guarantee.
TAX RISK. The risk that the issuer of tax-exempt securities will fail to
comply with certain requirements of the Internal Revenue Code, which could cause
interest income to be retroactively included in gross income.
VALUATION RISK. The risk that a fund has valued certain of its securities at
a higher price than it can sell them for.
PORTFOLIO TURNOVER
It is presently anticipated that the portfolio turnover rate of the Investment
Grade Bond Fund, the Global Asset Allocation Fund, and the Equity Fund will not
exceed 100%, 200%, and 200%, respectively. High portfolio turnover rates will
generally result in higher transaction costs to a Fund and may result in higher
levels of taxable realized gains to a Fund's shareholders.
INVESTMENT RESTRICTIONS
The Funds are subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding shares of the particular
Fund ("fundamental policies"). These fundamental policies (including those noted
by Footnote 1 in the chart above) are set forth in their entirety in the Funds'
Statement of Additional Information.
VALUATION OF SHARES
The net asset value of each Fund is determined and its Shares are priced as of
the close of regular trading of the New York Stock Exchange (generally 4:00 p.m.
Eastern time) on each Business Day ("Valuation Times"). For each Money Market
Fund, a "Business Day" constitutes (i) any day on which the Federal Reserve Bank
is open and the New York Stock Exchange (the "NYSE") is open for trading and
(ii) any other day (other than a day during which no Shares are tendered for
redemption and no orders to purchase Shares are received) during which there is
sufficient trading in a Fund's portfolio instruments that the Fund's net asset
value per share might be materially affected. For each Fund, other than the
Money Market Funds, a Business Day is (i) any day on which the NYSE is open for
trading and (ii) any other day (other than a day during which no Shares are
tendered for redemption and no orders to purchase Shares are received) during
which there is sufficient trading in a Fund's portfolio instruments that the
Fund's net asset value per share might be materially affected. Net asset value
per Share for purposes of pricing sales and redemptions is calculated by
determining the value of the class's proportional interest in the securities and
other assets of a Fund, less (i) such class's proportional share of general
liabilities and (ii) the liabilities allocable only to such class, and dividing
such amount by the number of relevant class Shares outstanding.
The securities in each Fund, other than the Money Market Funds, will be valued
at market value. If market quotations are not available, the securities will be
valued by a method which the Board of Trustees believes accurately reflects fair
value.
The Money Market Funds use the amortized cost method of valuing their
securities. This method values a security at its cost on the date of purchase
and thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of
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the impact fluctuating interest rates have on the market value of the security.
If the Board of Trustees determines that the deviation from a $1.00 price per
share may result in material dilution or other unfair results to Shareholders,
it will take appropriate steps to eliminate or reduce these consequences to the
extent reasonably practicable. Such steps may include selling portfolio
securities prior to maturity in order to realize capital gains or losses or to
shorten the average portfolio maturity of a Fund, adjusting or withholding
dividends, or utilizing a net asset value per share determined by using
available market quotations. There can be no assurance that a Money Market Fund
will maintain a stable net asset value of $1.00 per Share.
Most international securities held by the Global Asset Allocation Fund are
priced based on their market value as determined by reported sales prices or the
mean between their bid and asked prices. Portfolio securities which are
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except when an occurrence subsequent to the time a value was so established is
likely to have changed such value. Securities for which market quotations are
not readily available are valued at fair market value as determined in good
faith by or under the direction of the Board of Trustees. The amortized cost
method of valuation will also be used with respect to debt obligations with
sixty days or less remaining to maturity unless SBCL under the supervision of
the Board of Trustees determines such method does not represent fair value.
For further information about the valuation of investments, see the Statement
of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares are sold on a continuous basis by the Eureka Funds' Distributor, BISYS
Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to
purchase Shares, contact the Eureka Funds at (888) 890-8121.
PURCHASES OF CLASS A SHARES
Class A Shares may be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by Participating Organizations,
including brokers and dealers, under the Eureka Funds' Distribution and
Shareholder Services Plan. See "MANAGEMENT OF THE EUREKA FUNDS--Distribution
Plan."
Shares of the Eureka Funds sold to Participating Organizations acting in a
fiduciary, advisory, custodial (other than individual retirement accounts), or
other similar capacity on behalf of Customers will normally be held of record by
the Participating Organizations. With respect to Shares so sold, it is the
responsibility of the Participating Organization to transmit purchase or
redemption orders to the Distributor and to deliver federal funds for purchase
on a timely basis.
Investors may directly purchase Class A Shares of a Fund by completing and
signing an Account Registration Form and mailing it, together with a check (or
other negotiable bank draft or money order) for at least the minimum initial
purchase amount, payable to the Eureka Funds, P.O. Box 182792, Columbus, Ohio
43218-2792. Investors may obtain an Account Registration Form and additional
information regarding the Eureka Funds by contacting their local Sanwa Bank
California office or calling (888) 890-8121. Initial purchases of shares into a
new account may not be made by wire. Subsequent purchases of Class A Shares of a
Fund may be made at any time by mailing a check (or other negotiable bank draft
or money order) to the above address.
If an Account Registration Form has been previously received by the
Distributor, investors may also
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<PAGE> 43
purchase Class A Shares by telephone. Telephone orders may be placed by calling
the Eureka Funds at 888-890-8121. Payment for Class A Shares ordered by
telephone may be made by sending funds electronically to the Eureka Funds'
custodian. To make payments electronically, investors must call the Eureka Funds
at 888-890-8121 to obtain instructions regarding the bank account number into
which the funds should be wired and other pertinent information.
Class A Shares of the Investment Grade Bond Fund, the Global Asset Allocation
Fund and the Equity Fund are sold at the net asset value next determined after
receipt by the Distributor of an order in good form to purchase Shares (see
"VALUATION OF SHARES"). In the case of orders for the purchase of Shares placed
through a broker-dealer, the public offering price will be the net asset value
as so determined, but only if the broker-dealer receives the order prior to the
Valuation Time for that day and transmits to the Eureka Funds by the Valuation
Time. The broker-dealer is responsible for transmitting such orders promptly. If
the broker-dealer fails to do so, the investor's right to that day's closing
price must be settled between the investor and the broker-dealer. If the
broker-dealer receives the order after the Valuation Time for that day, the
price will be based on the net asset value determined as of the Valuation Time
for the next Business Day.
There is a minimum initial investment of $1,000 for the purchase of Class A
Shares of a Fund, and a $50 minimum initial investment for subsequent purchases.
The minimum initial investment amount is $50 if purchases are made in connection
with qualified retirement plans, systematic investment plans or payroll
deduction plans. There is no limit on the amount of Class A Shares that may be
purchased.
Shareholders will be mailed a confirmation of each new transaction in their
account. In the case of Class A Shares held of record by a Participating
Organization but beneficially owned by a Customer, confirmations of purchases,
exchanges and redemptions of Class A Shares by a Participating Organization will
be sent to the Customer by the Participating Organization. Certificates
representing Shares will not be issued.
EUREKA FUNDS INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
The Eureka Funds make available IRAs, including IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") and IRA "Rollover Accounts." An IRA enables
individuals, even if they participate in an employer-sponsored retirement plan,
to establish their own retirement program by purchasing Class A Shares for an
IRA. Eureka Funds IRA contributions may be tax-deductible and earnings are tax
deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted or eliminated for individuals who participate in
certain employer pension plans and whose annual income exceeds certain limits.
Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn income on a tax-deferred basis.
All Eureka Funds IRA distribution requests must be made in writing to BISYS
Fund Services, Inc. (the "Transfer Agent"). Any additional deposits to a Eureka
Funds IRA must distinguish the type and year of the contribution.
For more information on a Eureka Funds IRA call the Eureka Funds at
888-890-8121. Shareholders are advised to consult a tax adviser on Eureka Funds
IRA contribution and withdrawal requirements and restrictions. Investors should
read the Disclosure Statement and Custodial Agreement for further details on
eligibility, service fees, and tax implications.
ADDITIONAL INFORMATION ABOUT PURCHASING SHARES
Purchases of Class A Shares of the Eureka Funds will be effected only on a
Business Day (as defined in "VALUATION OF SHARES"). An order for a Fund received
prior to a Valuation Time on any Business Day will be executed at the net asset
value determined as of the next Valuation Time on the date of receipt. An order
received after the last Valuation Time on any Business Day will be exe-
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cuted at the net asset value determined as of the
next Valuation Time.
An order to purchase Class A Shares of a Money Market Fund will be deemed to
have been received by the Distributor when federal funds are available to the
Eureka Funds' custodian for investment. Federal funds are monies credited to a
bank's account within a Federal Reserve Bank. Payment for an order to purchase
Shares of a Money Market Fund which is transmitted by federal funds wire will be
available the same day for investment by the Eureka Funds' custodian, if
received prior to the last Valuation Time (see "VALUATION OF SHARES"). It is
strongly recommended that investors of substantial amounts use federal funds to
purchase Shares of a Money Market Fund.
Depending upon the terms of a particular Customer account, a Participating
Organization or Bank may charge a Customer's account fees for services provided
in connection with investment in the Eureka Funds. Information concerning this
Prospectus should be read in conjunction with any such information received from
the Participating Organizations or Banks.
The Eureka Funds reserve the right to reject any order for the purchase of its
Class A Shares in whole or in part, including purchases made with foreign drafts
or checks. The Eureka Funds will not accept third party checks for investment.
Please call the Eureka Funds at (888)-890 8121 regarding proper instructions
and information to purchase or redeem Shares by check or wire. Shareholders may
also execute telephone transactions as explained below.
AUTO INVEST PLAN
Eureka Funds' Auto Invest Plan enables Shareholders to make regular purchases
of Class A Shares through automatic deduction from their bank accounts. With
Shareholder authorization, the Transfer Agent will deduct the amount specified
(subject to the applicable minimums) from the Shareholder's bank account and
will automatically invest that amount in Class A Shares at the public offering
price on the date of such deduction. The required minimum initial investment
when opening an account using the Auto Invest Plan is $50 per Fund; the minimum
amount for subsequent investments in a Fund is $50. To participate in the Auto
Invest Plan, Shareholders should complete the appropriate section of the Account
Registration Form or submit a subsequent written request to the Transfer Agent.
To change the frequency or amount of the Auto Invest Plan or to discontinue the
feature, a Shareholder may call the Eureka Funds at 888-890-8121. Changes to the
bank information must be made in writing, with a signature guarantee (as
described below) to the Eureka Funds, P.O. Box 182792, Columbus, Ohio
43218-2792. The Auto Invest Plan may be amended or terminated without notice at
any time by the Distributor.
EXCHANGE PRIVILEGE
Class A Shares of each Fund may be exchanged for Class A Shares of the other
Funds, provided that the Shareholder making the exchange is eligible on the date
of the exchange to purchase Class A Shares (with certain exceptions and subject
to the terms and conditions described in this prospectus). Class A Shares of
each Fund may be exchanged for Trust Shares in instances where the Shareholder
becomes eligible to purchase Trust Shares. Depending upon the terms of a
particular Customer account, a Participating Organization may charge a fee with
regard to such an exchange. Information about such charges will be supplied by
the Participating Organization.
An exchange is considered a sale of Shares and will result in a capital gain
or loss for federal income tax purposes, which, in general, is calculated by
netting the Shareholder's tax cost (or "basis") in the Shares surrendered and
the value of the Shares received in the exchange.
A Shareholder wishing to exchange Class A Shares purchased directly from the
Eureka Funds may do so by contacting the Eureka Funds at 888-890-8121 or by
providing instructions to the Transfer Agent. If not selected on the Account
Registration form, the Shareholder will automatically
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<PAGE> 45
receive exchange privileges. A Shareholder wishing to exchange Class A Shares
purchased through a Participating Organization or Bank may do so by contacting
the Participating Organization or Bank. If an exchange request in good order is
received by the Distributor or the Transfer Agent by 4:00 p.m. (Eastern time) on
any Business Day, the exchange usually will occur on that day. Any Shareholder
who wishes to make an exchange should obtain and review a prospectus describing
the Fund and class of Shares which he or she wishes to acquire before making the
exchange. The exchange privilege may be exercised only in those states where the
class of Shares of such other Fund may legally be sold. The Eureka Funds reserve
the right to change the terms and conditions of the exchange privilege discussed
herein upon sixty days' written notice.
The Funds are not intended to serve as vehicles for frequent trading in
response to short-term fluctuations in the market. Due to the disruptive effect
that excessive trading can have on efficient portfolio management, the Funds
have established a policy of limiting exchange activity to four substantive
exchange redemptions from a Fund during any calendar year. Other than exchanges
pursuant to the Eureka Funds's Auto Exchange Plan, there is a $500 minimum for
exchanges.
AUTO EXCHANGE
Eureka Funds Auto Exchange enables Shareholders to make regular, automatic
withdrawals from Class A Shares of a Money Market Fund and use those proceeds to
benefit from dollar-cost-averaging by automatically making purchases of shares
of another Eureka Fund. With shareholder authorization, the Transfer Agent will
withdraw the amount specified (subject to the applicable minimums) from the
Shareholder's Money Market Fund account and will automatically invest that
amount in Class A Shares of the Fund designated by the Shareholder. In order to
participate in the Auto Exchange, Shareholders must have a minimum beginning
balance of $10,000 in their Money Market Fund account and are still subject to
minimum account balance requirements as described below.
To participate in the Auto Exchange, Shareholders should complete the
appropriate section of the Account Registration Form, which can be acquired by
calling the Distributor. To change the Auto Exchange instructions or to
discontinue the feature, a Shareholder must send a written request to the Eureka
Funds, P.O. Box 182792, Columbus, Ohio 43218-2792. The Auto Exchange may be
amended or terminated without notice at any time by the Distributor.
REDEMPTION OF SHARES
Shareholders may redeem their Class A Shares without charge on any day that
net asset value is calculated (see "VALUATION OF SHARES") and Shares may
ordinarily be redeemed by mail or by telephone. However, all or part of a
Customer's Shares may be required to be redeemed in accordance with instructions
and limitations pertaining to his or her account held by a Participating
Organization or Bank. For example, if a Customer has agreed to maintain a
minimum balance in his or her account, and the balance in that account falls
below that minimum, the Customer may be obliged to redeem, or the Participating
Organization or Bank may redeem for and on behalf of the Customer, all or part
of the Customer's Shares to the extent necessary to maintain the required
minimum balance.
Each Fund reserves the right to redeem a shareholder's Class A Shares if the
shareholder does not maintain a balance of $1,000 in the Class A Shares of that
Fund.
REDEMPTION BY MAIL
A written request for redemption must be received by the Eureka Funds in order
to constitute a valid tender for redemption. The signature on the written
request must be guaranteed by a bank, broker, dealer, credit union, securities
exchange, securities association, clearing agency or savings association, as
those terms are defined in Rule 17Ad-15 under the Securities Exchange Act of
1934 if (a) a redemption check is to be payable to anyone other than the
Shareholder(s) of record;
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<PAGE> 46
(b) a redemption check is to be mailed to the Shareholder(s) at an address other
than the address of record or other than to a commercial bank designated on the
Account Registration Form of such Shareholder(s). The Distributor reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. A notary public will not be accepted as a
signature guarantee. Proceeds may be mailed to the address of record or sent
electronically or mailed to a previously designated bank account without a
signature guarantee. See "Redemption by Telephone" for further discussion
regarding sending proceeds to your bank account.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option on
the Account Registration Form or in a subsequent written request to the Transfer
Agent. A Shareholder may have the proceeds mailed to the address of record or
sent electronically or mailed directly to a domestic commercial bank account
previously designated by the Shareholder on the Account Registration Form. Under
most circumstances, such payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. Such electronic redemption
requests may be made by the Shareholder by telephone to the Transfer Agent. The
Transfer Agent may reduce the amount of a wire redemption payment by its
then-current wire redemption charge. Presently there is no charge. There is no
charge for having payment of redemption requests mailed or sent via the
Automated Clearing House to a designated bank account. For telephone
redemptions, contact SBCL or your Participating Organization.
TELEPHONE PROCEDURES
A change of address may be requested over the telephone or by fax. These
requests will be processed and subject to independent verification at the point
of entry. Telephone and faxed address changes may not be made in conjunction
with a redemption request or a change in Auto Invest/ Auto Withdrawal
instructions. A shareholder that changes their address by phone will have their
account subject to a ten business day escrow hold.
The Distributor, the Transfer Agent, SBCL and the Eureka Funds will not be
liable for any losses, damages, expenses or costs arising out of any telephone
transaction (including purchases, exchanges, and redemptions) effected in
accordance with the Eureka Funds' telephone transaction procedures, upon
instructions reasonably believed to be genuine. The Eureka Funds will employ
procedures designed to provide reasonable assurance that instructions
communicated by telephone are genuine; if these procedures are followed, the
Eureka Funds will not be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording phone conversations, sending
confirmations to Shareholders within 72 hours of the telephone transaction,
verifying the account name and a shareholder's account number or tax
identification number and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, investors are unable to effect telephone transactions, Shareholders
may mail redemption requests to the Eureka Funds.
CHECK WRITING SERVICE
Shareholders of Class A Shares of a Money Market Fund may write checks in the
amount of $500 or more, against their Fund account. A Shareholder will receive a
supply of checks after a signed signature card is received. A check may be made
payable to any person, and the Shareholder's account will continue to earn
dividends until the check clears. Because of the difficulty of determining in
advance the exact value of a Fund account, a Shareholder may not use a check to
close his account. The Shareholder's account will be charged a fee for stopping
payment of a check upon the Shareholder's request or if the check cannot be
honored because of insufficient funds or other valid reasons.
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AUTO WITHDRAWAL PLAN
Eureka Funds Auto Withdrawal Plan enables Shareholders to make regular
redemptions of Class A Shares of a Fund. With Shareholder authorization, the
Transfer Agent will automatically redeem Class A Shares at the net asset value
of the applicable Fund on the dates of withdrawal and have the amount specified
transferred according to the instructions of the Shareholder. To participate in
the Auto Withdrawal Plan Shareholders must have at least $5,000 in the Fund
selected and must maintain a minimum account balance of $1,000 in the Fund.
Purchase of additional Class A Shares concurrent with withdrawals may be
disadvantageous to certain Shareholders because of tax liabilities.
To participate in the Auto Withdrawal Plan, Shareholders should complete the
appropriate section of the Account Registration Form or submit a written request
(with a signature guarantee) to the Transfer Agent. For a Shareholder to change
the Auto Withdrawal instructions or to discontinue the feature, the request must
be made in writing to the Eureka Funds, P.O. Box 182792, Columbus, Ohio
43218-2792. The Auto Withdrawal Plan may be amended or terminated without notice
at any time by the Distributor.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However, to
the greatest extent possible, the Eureka Funds will attempt to honor requests
from Shareholders for next Business Day payments if the request for redemption
is received by the Transfer Agent before the Valuation Time on a Business Day
or, if the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Eureka Funds or the Shareholders of the particular Fund
to sell or liquidate portfolio securities in an amount sufficient to satisfy
requests for payments in that manner. The Money Market Funds will attempt to
honor requests from Shareholders for same day payment upon redemption of Shares
if the request for redemption is received by the Transfer Agent before 4:00 p.m.
Eastern time, on a Business Day or, if the request for redemption is received
after 4:00 p.m. Eastern time, to honor requests for payment on the next Business
Day, unless it would be disadvantageous to the Fund or its Shareholders to sell
or liquidate portfolio securities in an amount sufficient to satisfy requests
for payments in that manner.
In some instances, a Fund may be requested to redeem Shares for which it has
not yet received good payment. Under such circumstances, the Eureka Funds may
delay forwarding the proceeds until payment has been collected for the purchase
of such Shares, which may take up to 15 days or more. To avoid delay in payment
upon redemption, investors should purchase Shares by certified check or by wire
transfer. The Eureka Funds intend to pay cash for all Shares redeemed, but under
abnormal conditions which may make payment in cash unwise, the Eureka Funds may
make payment wholly or partly in portfolio securities at their then current
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Eureka
Funds reserve the right to redeem, at net asset value, the Shares in an account
with a value of less than $1,000. Accordingly, an investor purchasing Shares of
a Fund in only the minimum investment amount may be subject to such involuntary
redemption if he thereafter redeems some of his Shares. Before the Eureka Funds
exercises its right to redeem such Shares, the Shareholder will be given notice
that the value of his Shares of a Fund is less than the minimum amount and will
be allowed 60 days to make an additional investment to increase the value of the
account to at least $1,000.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the
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<PAGE> 48
Eureka Funds may suspend the right of redemption or redeem Shares involuntarily
if it appears appropriate to do so in light of the Eureka Funds'
responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
Each Fund will be treated as a separate entity for federal income tax
purposes. Each Fund intends to qualify for treatment as a "regulated investment
company" under the Internal Revenue Code of 1986 (the "Code"). If qualified, a
Fund will not have to pay federal taxes on amounts it distributes to
Shareholders. Regulated investment companies are subject to a federal excise tax
if they do not distribute substantially all of their income on a timely basis.
Each Fund intends to avoid paying federal income and excise taxes by timely
distributing substantially all its net income and net realized capital gains.
Dividends received by a Shareholder of a Fund that are derived from such
Fund's investments in U.S. government securities may not be entitled to the
exemption from state and local income taxes that would be available if the
Shareholder had purchased U.S. government securities directly. Shareholders are
advised to consult their tax adviser concerning the application of state and
local taxes to distributions received from a Fund.
Shareholders will be advised at least annually as to the amount and federal
income tax character of distributions made during the year.
The net investment income of each Money Market Fund is declared daily as a
dividend to Shareholders at the close of business on the day of declaration.
Dividends will generally be paid monthly. The Money Market Funds do not expect
to realize any long-term capital gains and, therefore, do not foresee paying any
"capital gains dividends" as described in the Code. However, any such capital
gains will be distributed no more than twice a year after deduction for any
available capital loss carryforward.
The amount of dividends payable with respect to the Trust Shares will exceed
dividends on Class A Shares due to the Distribution and Shareholder Services
Plan fee applicable to Class A Shares.
A dividend on the Shares of the Investment Grade Bond Fund is declared daily
and paid monthly. A dividend on the Shares of the Global Asset Allocation Fund
is declared and paid annually. A dividend on the Shares of the Equity Fund is
declared and paid monthly. Net realized capital gains, if any, are distributed
at least annually to Shareholders of record after deduction for any available
capital loss carry forward.
A Shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional Shares at net asset value as of
the date of payment unless the Shareholder elects to receive such dividends or
distributions in cash. Such election, or any revocation thereof, must be made in
writing to the Eureka Funds, P.O. Box 182792, Columbus, Ohio 43218-2792, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Dividends are paid in cash not
later than seven Business Days after a Shareholder's complete redemption of his
or her Shares. If you elect to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
your cash election will be changed automatically and your future dividend and
capital gains distributions will be reinvested in the Fund at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be cancelled and will be held in a non-interest bearing account pending
further instructions from the Shareholder.
Dividends are generally taxable in the taxable year received. However,
dividends declared in Octo-
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ber, November or December to Shareholders of record during such a month and paid
during the following January are treated for tax purposes as if they were
received by each Shareholder on December 31 of the year in which the dividends
were declared.
Dividends will generally be taxable to a Shareholder as ordinary income to the
extent of the Shareholder's ratable share of the earnings and profits of a Fund
as determined for tax purposes. Certain dividends paid by the Investment Grade
Bond Fund, the Global Asset Allocation Fund, and the Equity Fund, and
so-designated by the Funds may qualify for the dividends received deduction for
corporate shareholders. Because all of the net investment income of the
remaining Funds is expected to be interest income, it is anticipated that no
distributions from such Funds will qualify for the dividends received deduction.
Distributions of net realized capital gains are taxable to Shareholders as
long-term capital gains regardless of how long the Shareholder has held Shares
in the Fund. Shareholders who are not subject to tax on their income generally
will not have to pay federal income tax on amounts distributed to them.
Dividends that are derived from interest on a Fund's investments in U.S.
government securities may be eligible for exemption from the state and local
taxes of certain jurisdictions, although state and local tax authorities may not
agree with this view. However, distributions of income derived from repurchase
agreements and securities lending transactions generally will not qualify for
exemption from state and local income taxes.
The foregoing is a summary of certain federal, state and local income tax
consequences of investing in a Fund. Shareholders should consult their own tax
advisers concerning the tax consequences of an investment in a Fund.
TAX CONSIDERATIONS RELATING TO THE GLOBAL ASSET ALLOCATION FUND
Dividends and certain interest income earned by the Global Asset Allocation
Fund from foreign securities may be subject to foreign withholding taxes or
other taxes. So long as more than 50% of the value of the Fund's total assets at
the close of any taxable year consists of stock or securities of
foreign corporations, the Fund may elect, for federal income tax purposes, to
treat certain foreign taxes paid by it, including generally any withholding
taxes and other foreign income taxes, as paid by its shareholders. It is
possible that the Global Asset Allocation Fund will make this election in
certain years. The remaining Funds do not expect to be eligible to make this
election. If a Fund makes the election, the amount of such foreign taxes paid by
a Fund will be included in its shareholders' income pro rata (in addition to
taxable distributions actually received by them), and each shareholder will be
entitled either (a) to credit a proportionate amount
of such taxes against a shareholder's federal income tax liabilities, or (b) if
a shareholder itemizes deductions, to deduct such proportionate amounts from
federal taxable income.
Fund transactions in foreign currencies and hedging activities may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in value of the foreign currency concerned. In addition, such
activities will likely produce a difference between book income and taxable
income. This difference may cause a portion of a Fund's income distributions to
constitute a return of capital for tax purposes or require the Fund to make
distributions exceeding book income to qualify as a regulated investment company
for tax purposes.
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MANAGEMENT OF THE EUREKA FUNDS
TRUSTEES
The Board of Trustees of the Eureka Funds has overall responsibility for the
Funds. The Board of Trustees is elected by the Shareholders. There are currently
five Trustees, two of whom are "interested persons" of the Eureka Funds within
the meaning of that term under the 1940 Act. The Trustees, in turn, elect the
officers of the Eureka Funds to supervise actively its day-to-day operations.
INVESTMENT ADVISER
SBCL serves as Investment Adviser of each Fund. SBCL is a wholly-owned
subsidiary of The Sanwa Bank, Limited, of Japan. Its principal offices are
located at 601 South Figueroa Street, Los Angeles, California 90017.
Established in 1972, SBCL provides a full range of personal and business
banking services through a network of more than 100 branches and offices
statewide. As of September 30, 1997, SBCL had approximately $1.45 billion of
assets under management.
Subject to the general supervision of the Board of Trustees and in accordance
with the investment objectives and restrictions of a Fund, SBCL manages the
Funds, makes decisions with respect to, and places orders for, all purchases and
sales of its investment securities, and maintains its records relating to such
purchases and sales.
Under an investment advisory agreement between the Eureka Funds and SBCL, the
fee payable to SBCL by each Fund for investment advisory services is the lesser
of: (a) a fee computed daily and paid monthly at the annual rate of thirty one-
hundredths of one percent (0.30%) of the Prime Money Market Fund's average daily
net assets; twenty one-hundredths of one percent (0.20%) of the U.S. Treasury
Obligations Fund's average daily net assets; sixty one-hundredths of one percent
(0.60%) of the Investment Grade Bond Fund's average daily net assets; ninety
one-hundredths of one percent (0.90%) of the Global Asset Allocation Fund's
average daily net assets; and seventy five one-hundredths of one percent (0.75%)
of the Equity Fund's average daily net assets, or (b) such fee as may from time
to time be agreed upon by the Eureka Funds and SBCL. The fee agreed to from time
to time by the Eureka Funds and SBCL may be significantly lower than the fee
calculated at the annual rate and the effect of such agreed upon lower fee would
be to lower a Fund's expenses and increase the net income of the Fund during the
period when such agreed upon lower fee is in effect.
Hal Nachtrieb and David Lampert, both Vice Presidents of SBCL, co-manage the
Investment Grade Bond Fund. They have been with SBCL since 1995 and 1984,
respectively, where they are responsible for the investment management of
approximately $500 million in personal and institutional fixed income assets,
including approximately $100 million in commingled bond funds.
Prior to joining SBCL, Mr. Nachtrieb developed a managed equity and fixed
income funds for Franklin Resources. He also served as vice president for
Continental Bank, and before that, managed the fixed income trading desk at
Imperial Corporation of America. Mr. Nachtrieb began his career as an investment
manager as a mortgage-backed options trader for Drexel Burnham Lambert. Mr.
Nachtrieb earned a master of business administration in finance from the
University of Southern California and a bachelor of science in economics from
Lewis & Clark College in Portland, Oregon.
Most recently, Mr. Lampert was the Deputy Treasurer of SBCL responsible for
all fixed income activities of the Treasury Department. Over the years, his
responsibilities included trading bonds and bond futures, developing and
implementing derivatives strategies for the bank and customers, and managing a
$1.0 billion money market portfolio and the $600 million bond portfolio. Mr
Lampert graduated from the University of California at Los Angeles with a
bachelor of arts in Business/Economics.
Richard Weiss, Chief Investment Officer and Senior Vice President of SBCL, and
Brian Garbe,
21
<PAGE> 51
Director of Investment Research & Strategy and Vice-President of SBCL, co-manage
the Equity Fund and Global Asset Allocation Fund. They have been with SBCL since
1994, where they are responsible for the investment management of approximately
$1.6 billion in personal and institutional assets, including approximately $250
million in commingled equity and international funds.
Mr. Weiss has over 15 years of experience in the investment management
industry. Prior to joining SBCL, Messrs. Weiss and Garbe both were employed by
Vantage Global Advisors where they acted as manager and trader, respectively,
for global asset allocation portfolios. Before that, they were managing director
and investment officer, respectively, at TSA Capital Management, again
responsible for the management and back-office of global investments. Earlier in
his career, Mr. Weiss was a quantitative investment strategist for Paine Webber
in New York, and director of quantitative analysis and systems for Mellon Bank
in Pittsburgh, Pennsylvania.
Mr. Weiss graduated magna cum laude with a master of business administration
in finance and econometrics from the University of Chicago. He also graduated
magna cum laude with a bachelor of science in finance and statistics from The
Wharton School, University of Pennsylvania.
Mr. Garbe earned a master of business administration and a bachelor of science
in applied mathematics from the University of California at Los Angeles.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services, Inc. is the administrator for each Fund and also acts as
the Eureka Funds' principal underwriter and distributor (the "Administrator" or
the "Distributor") under agreements approved by the Eureka Funds' Board of
Trustees. BISYS Fund Services, Inc. is wholly owned by The BISYS Group, Inc.,
150 Clove Road, Little Falls, New Jersey 07424, a publicly owned company engaged
in information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of a Fund's administration
and operation. Under a management and administration agreement between the
Eureka Funds and the Administrator, the fee payable by a Fund to the
Administrator for management administration services is the lesser of (a) a fee
computed at the annual rate of twenty one-hundredths of one percent (0.20%) of a
Fund's average daily net assets or (b) such fee as may from time to time be
agreed upon by the Eureka Funds and the Administrator. A fee agreed to from time
to time by the Eureka Funds and the Administrator may be significantly lower
than the fee calculated at the annual rate and the effect of such agreed upon
lower fee would be to lower a Fund's expenses and increase the net income of the
Fund during the period when such agreed upon lower fee is in effect.
SERVICE PLAN
Under the "Service Plan," a Fund will pay a monthly service fee to BISYS Fund
Services, Inc. ("BISYS") as compensation for services in connection with the
Service Plan at an annual rate equal to twenty-five one-hundredths of one
percent (.25%) of the average daily net assets of Class A Shares of each Fund.
BISYS may periodically waive all or a portion of the fee with respect to a Fund.
BISYS may use the service fee to pay banks, other financial institutions and
intermediaries, broker-dealers, SBCL and SBCL's affiliates and subsidiaries
compensation for services or reimbursement of expenses incurred in connection
with the provision of administrative services or to provide administrative
services to the holders of Class A Shares. All payments by BISYS for services
under the Service Plan will be made pursuant to an agreement (a "Service
Agreement") between BISYS and such bank, financial institution or intermediary,
broker-dealer, or affiliate or subsidiary ("Participating Organization"). A
Service Agreement will relate to the provision of administrative services to the
Participating Organization's customers owning a Fund's Class A Shares. Under the
Service Plan, a Participating Organization may include SBCL or a subsid-
22
<PAGE> 52
iary bank or nonbank affiliates, or the subsidiaries or affiliates of those
banks. A Service Agreement entered into with a bank (or any of its subsidiaries
or affiliates) will contain a representation that the bank (or subsidiary or
affiliate) believes that it possesses the legal authority to perform the
services contemplated by the Service Agreement without violation of applicable
banking laws (including the Glass-Steagall Act) and regulations.
EXPENSES
SBCL and the Administrator each bear all expenses in connection with the
performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Fund. Each Fund bears the following
expenses relating to its operations: taxes, interest, any brokerage fees and
commissions, fees and travel expenses of the Trustees, Commission fees, state
securities qualification and renewal fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
Shareholders, outside auditing and legal expenses, amortized organizational
expenses, advisory and administration fees, fees and out-of-pocket expenses of
the custodian and the Transfer Agent, fees and out-of-pocket expenses for fund
accounting services, expenses incurred for pricing securities owned by a Fund,
certain insurance premiums, costs of maintenance of a Fund's existence, costs
and expenses of Shareholders' and Trustees' reports and meetings, and any
extraordinary expenses incurred in its operation. As a general matter, expenses
are allocated to the Class A Shares and Trust Shares of a Fund on the basis of
the relative net asset value of each class. At present, the only expenses that
will be borne solely by Class A Shares, other than in accordance with the
relative net asset value of the class, are expenses under the Eureka Funds'
Distribution and Shareholder Services Plan ("Distribution Plan") which relate
only to the Class A Shares.
The expenses of each Fund have been capitalized and are being amortized in the
first five years of each Fund's operations. Such amortization will reduce the
amount of income available for payment as dividends.
DISTRIBUTION PLAN
The Eureka Funds' Class A Shares are sold on a continuous basis by the
Distributor. Under the "Distribution Plan," a Fund will pay a monthly
distribution fee to the Distributor as compensation for its services in
connection with the Distribution Plan at an annual rate equal to twenty-five
one-hundredths of one percent (.25%) of the average daily net assets of Class A
Shares of each Fund. The Distributor may periodically waive all or a portion of
the fee with respect to a Fund in order to increase the net investment income of
the Fund available for distribution as dividends. The Distributor may use the
distribution fee to provide distribution assistance with respect to a Fund's
Class A Shares or to provide shareholder services to the holders of such Shares.
The Distributor may also use the distribution fee (i) to pay financial
institutions and intermediaries (such as insurance companies and investment
counselors but not including banks), broker-dealers, and the Distributor's
affiliates and subsidiaries compensation for services or reimbursement of
expenses incurred in connection with distribution assistance or (ii) to pay
banks, other financial institutions and intermediaries, broker-dealers, and the
Distributor's affiliates and subsidiaries compensation for services or
reimbursement of expenses incurred in connection with the provision of
shareholder services. All payments by the Distributor for distribution
assistance or shareholder services under the Distribution Plan will be made
pursuant to an agreement (a "Servicing Agreement") between the Distributor and
such bank, other financial institution or intermediary, broker-dealer, or
affiliate or subsidiary of the Distributor ("Participating Organizations"). A
Servicing Agreement will relate to the provision of distribution assistance in
connection with the distribution of a Fund's Class A Shares to the Participating
Organization's customers on whose behalf the investment in such Shares is made
and/or to the provision of shareholder services to the Participating
Organization's customers owning a Fund's Class A
23
<PAGE> 53
Shares. Under the Distribution Plan, a Participating Organization may include
SBCL or a subsidiary bank or nonbank affiliates, or the subsidiaries or
affiliates of those banks. A Servicing Agreement entered into with a bank (or
any of its subsidiaries or affiliates) will contain a representation that the
bank (or subsidiary or affiliate) believes that it possesses the legal authority
to perform the services contemplated by the Servicing Agreement without
violation of applicable banking laws (including the Glass-Steagall Act) and
regulations.
The distribution fee will be payable without regard to whether the amount of
the fee is more or less than the actual expenses incurred in a particular year
by the Distributor in connection with distribution assistance or shareholder
services rendered pursuant to the Servicing Agreements entered into under the
Distribution Plan. If the amount of the distribution fee is greater than the
Distributor's actual expenses incurred in a particular year (and the Distributor
does not waive that portion of the distribution fee), the Distributor will
realize a profit in that year from the distribution fee. If the amount of the
distribution fee is less than the Distributor's actual expenses incurred in a
particular year, the Distributor will realize a loss in that year under the
Distribution Plan and will not recover from a Fund the excess of expenses for
the year over the distribution fee, unless actual expenses incurred in a later
year in which the Distribution Plan remains in effect were less than the
distribution fee paid in that later year.
The Distribution Plan also contains a so-called "defensive" provision
applicable to all classes of Shares. Under this defensive provision to the
extent that any payment made to the Administrator, including payment of
administration fees, should be deemed to be indirect financing of any activity
primarily intended to result in the sale of Shares issued by the Eureka Funds
within the context of Rule 12b-1 under the 1940 Act, such payment shall be
deemed to be authorized by the Distribution Plan.
BANKING LAWS
SBCL believes that it possesses the legal authority to perform the investment
advisory services for the Eureka Funds contemplated by its investment advisory
agreement with the Eureka Funds and described in this Prospectus without
violation of applicable banking laws and regulations, and has so represented to
the Eureka Funds. Future changes in federal or state statutes and regulations
relating to permissible activities of banks or bank holding companies and their
subsidiaries and affiliates as well as further judicial or administrative
decisions or interpretations of present and future statutes and regulations
could change the manner in which SBCL could continue to perform such services
for the Eureka Funds. See "MANAGEMENT OF EUREKA FUNDS--Glass Steagall Act" in
the Statement of Additional Information for further discussion of applicable
banking laws and regulations.
GENERAL INFORMATION
DESCRIPTION OF THE EUREKA FUNDS AND ITS SHARES
The Eureka Funds, organized as a Massachusetts business trust on April 7, 1997
named Sanwa Fund, commenced operations on , 1997. There are an
unlimited number of authorized Shares of beneficial interest of the Eureka Funds
which may, without Shareholder approval, be divided into an unlimited number of
series of such Shares, and which are presently divided into five series of
Shares, one for each of the following Funds: the Prime Money Market Fund, the
U.S. Treasury Obligations Fund, the Investment Grade Bond Fund, the Global Asset
Allocation Fund, and the Equity Fund. Each Fund offers to the public two classes
of shares: Class A and Trust Shares. Each Share represents an equal
proportionate interest in a Fund with other Shares of the same series and class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to
24
<PAGE> 54
that Fund as are declared at the discretion of the Trustees (see "Miscellaneous"
below).
Shareholders are entitled to one vote per Share (with proportional voting for
fractional Shares) on such matters as Shareholders are entitled to vote.
Shareholders vote in the aggregate and not by series or class on all matters
except (i) when required by the 1940 Act, Shares shall be voted by individual
series, (ii) when the Trustees have determined that the matter affects only the
interests of a particular series or class, and (iii) only the holders of Class A
Shares will be entitled to vote on matters submitted to Shareholder vote with
regard to the Distribution Plan applicable to such class.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Eureka Funds or a
particular Fund means the affirmative vote, at a meeting of Shareholders duly
called, of the lesser of (a) 67% or more of the votes of Shareholders of the
Eureka Funds or that particular Fund present at such meeting at which the
holders of more than 50% of the votes attributable to the Shareholders of record
of the Eureka Funds or such Fund are represented in person or by proxy, or (b)
the holders of more than 50% of the outstanding votes of Shareholders of the
Eureka Funds or such Fund.
Overall responsibility for the management of the Eureka Funds is vested in the
Board of Trustees. See "MANAGEMENT OF EUREKA FUNDS-- Trustees of the Eureka
Funds." Individual Trustees are elected by the Shareholders and may be removed
by the Board of Trustees or Shareholders at a meeting held for such purpose in
accordance with the provisions of the Declaration of Trust and the By-laws of
the Eureka Funds and Massachusetts law. See "ADDITIONAL INFORMATION--
Miscellaneous" in the Statement of Additional Information for further
information.
Although the Eureka Funds is not required to hold annual meetings of
Shareholders, Shareholders holding at least 10% of the Eureka Funds' outstanding
Shares have the right to call a meeting to elect or remove one or more of the
Trustees of the Eureka Funds. Shareholder inquiries should be directed to the
Secretary of the Eureka Funds at 3435 Stelzer Road, Columbus, Ohio 43219.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
The Bank of New York, serves as Custodian for the Eureka Funds.
BISYS Fund Services, Inc. serves as transfer agent for and provides fund
accounting services to the Eureka Funds.
OTHER CLASSES OF SHARES
In addition to Class A Shares, the Eureka Funds also offer Trust Shares of
each Fund. Trust Shares are offered to Sanwa Bank California and its affiliates
and other financial service providers approved by the Distributor for the
investment of funds for which they act in a fiduciary, advisory, agency,
custodial (other than for individual retirement accounts), or similar capacity.
Trust Shares are sold at net asset value and are not subject to a Distribution
Plan fee or a Service Plan fee. A salesperson or other person entitled to
receive compensation for selling or servicing the shares may receive different
compensation with respect to one particular class of shares over another in the
Fund. For further details regarding eligibility requirements for the purchase of
Trust Shares, contact your Sanwa Bank California representative.
PERFORMANCE INFORMATION
GENERAL. From time to time, a Money Market Fund's annualized "yield" and
"effective yield" and total return for Class A Shares may be presented in
advertisements, sales literature and shareholder reports. The "yield" of a Money
Market Fund is based upon the income earned by the Fund over a seven-day period
and then annualized, i.e. the income earned in the period is assumed to be
earned every seven days over a 52-week period and is stated as a percentage of
the investment. The "effective yield" of a Money Market Fund is calculated
similarly but when annualized, the income earned by the
investment is assumed to be reinvested in Shares of the Eureka Funds and thus
compounded in the course of a 52-week period. The effective yield will
25
<PAGE> 55
be higher than the yield because of the compounding effect of the assumed
reinvestment.
Total return is calculated for the past year and the period since the
establishment of each Money Market Fund. Average annual total return is measured
by comparing the value of an investment in a Fund at the beginning of the
relevant period to the redemption value of the investment at the end of the
period (assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized.
From time to time performance information of the Investment Grade Bond Fund,
the Global Asset Allocation Fund and the Equity Fund showing its average annual
total return, aggregate total return, and/or yield may be presented in
advertisements, sales literature and shareholder reports. Such performance
figures are based on historical earnings and are not intended to indicate future
performance. Average annual total return will be calculated for the period since
the establishment of a Fund. Average annual total return is measured by
comparing the value of an investment in a Fund at the beginning of the relevant
period to the redemption value of an investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized. Yield will be
computed by dividing the net investment income per Share for the Investment
Grade Bond Fund, the Global Asset Allocation Fund and the Equity Fund earned
during a recent 30-day period by that Fund's per Share maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last day of the period and annualizing the results.
The Investment Grade Bond Fund, the Global Asset Allocation Fund and the
Equity Fund may also calculate a distribution rate. Distribution rates will be
computed by dividing the distribution per Share of a class made by a Fund over a
twelve-month period by the maximum offering price per Share. The distribution
rate includes both income and capital gain dividends and does not reflect
unrealized gains or losses. The calculation of income in the distribution rate
includes both income and capital gain dividends and does not reflect unrealized
gains or losses, although a Fund may also present a distribution rate excluding
the effect of capital gains. The distribution rate differs from the yield,
because it includes capital items which are often non-recurring in nature, and
may include returns of principal, whereas yield does not include such items. The
Funds do not intend to publish distribution rates in Fund advertisements but may
publish such rates in supplemental sales literature.
Yield, effective yield, total return and distribution rate will be calculated
separately for each Class of Shares. Because Trust Shares are not subject to
Distribution Plan fees or Service Plan fees, the yield and total return for
Trust Shares will be higher than that of the Class A Shares for the same period.
Investors may also judge the performance of a Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Analytical Services, Inc., IBC/Donoghue's MONEY
FUND REPORT and Ibbotson Associates, Inc. References may also be made to indices
or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, American Banker, Fortune, Institutional
Investor, Ibbotson Associates, Inc., Morningstar, Inc., CDA/Weisenberger,
Pension and Investments, U.S.A. Today and local newspapers. In addition to
performance information, general information about the Funds that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to Shareholders.
Information about the performance of a Fund is based on a Fund's record up to
a certain date and is not intended to indicate future performance. Yields and
total returns of a Fund will fluctuate. Any fees charged by the Participating
Organizations to their customers in connection with investment in a Fund
26
<PAGE> 56
are not reflected in the Eureka Funds' performance information.
Further information about the performance of a Fund is contained in that
Fund's annual report to Shareholders, which may be obtained without charge by
contacting the Eureka Funds at the address below.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports describing the
investment operations their Fund(s) and annual financial statements audited by
independent public accountants.
Inquiries regarding the Eureka Funds may be directed in writing to the Eureka
Funds at the following address: the Eureka Funds, P.O. Box 182792, Columbus,
Ohio 43218-2792.
27
<PAGE> 57
INVESTMENT ADVISER
SANWA BANK CALIFORNIA
Investment Management Department
601 S. Figueroa Street
Los Angeles, California 90017
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, DC 20005
TRANSFER AGENT
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
AUDITORS
Ernst & Young LLP
10 West Broad Street
Columbus, Ohio 43215
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary........................ 2
Fee Table................................. 4
Investment Objective and Policies......... 5
Valuation of Shares....................... 12
How to Purchase and Redeem Shares......... 13
Dividends and Taxes....................... 19
Management of Eureka Funds................ 21
General Information....................... 24
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE EUREKA
FUNDS OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
EUREKA FUNDS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
MONEY MARKET FUNDS
------------------------
Eureka Prime Money Market Fund
Eureka U.S. Treasury Obligations Fund
BOND FUND
------------------------
Eureka Investment Grade Bond Fund
BALANCED FUND
------------------------
Eureka Global Asset Allocation Fund
STOCK FUND
------------------------
Eureka Equity Fund
CLASS A SHARES
SANWA BANK CALIFORNIA
INVESTMENT ADVISER
BISYS FUND SERVICES, INC.
ADMINISTRATOR AND DISTRIBUTOR
PROSPECTUS DATED
OCTOBER 31, 1997
<PAGE> 58
CROSS REFERENCE SHEET
---------------------
EUREKA FUNDS
------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
<TABLE>
<CAPTION>
Statement of Additional
Part B Item Information Caption
- ----------- ------------------------
<S> <C>
Cover Page Cover Page
Table of Contents Table of Contents
General Information and History Additional Information -
Organization and Description of
Shares
Investment Objective and Policies Investment Objective and Policies
Management of the Eureka Funds Management of the Eureka Funds
Control Persons and Principal
Holders of Securities Miscellaneous
Investment Advisory and Other Services Management of the Eureka Funds
Brokerage Allocation and Other Practices Management of the Eureka Funds
Capital Stock and Other Securities Valuation; Additional Purchase
and Redemption Information;
Management of the Eureka
Funds; Additional Information
Purchase, Redemption and Pricing
of Securities Being Offered Valuation; Additional Purchase
and Redemption Information;
Management of the Eureka
Funds
Tax Status Additional Tax Information
</TABLE>
<PAGE> 59
Underwriters Management of Eureka
Funds
Calculation of Performance Data Performance Information
Financial Statements Financial Statements
-2-
<PAGE> 60
----------------
EUREKA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1997
----------------
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectuses of the Eureka Prime Money Market
Fund, the Eureka U.S. Treasury Obligations Fund, the Eureka Investment Grade
Bond Fund, the Eureka Global Asset Allocation Fund, and the Eureka Equity Fund
which are dated October 31, 1997. This Statement of Additional Information is
incorporated by reference in its entirety into the Prospectuses. Copies of the
Prospectuses may be obtained by writing the Eureka Funds at P.O. Box 182792,
Columbus, Ohio 43218-2792, or by telephoning toll free (888) 890-8121.
<PAGE> 61
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EUREKA FUNDS ...................................................................................................B-1
INVESTMENT OBJECTIVE AND POLICIES...............................................................................B-1
Additional Information on Portfolio Instruments.............................................................B-1
Investment Restrictions....................................................................................B-19
Additional Information Regarding Fundamental Investment Restrictions.......................................B-19
Portfolio Turnover.........................................................................................B-21
VALUATION......................................................................................................B-22
Valuation of the Money Market Funds........................................................................B-22
Valuation of the Investment Grade Bond Fund, the Global Asset Allocation Fund and the
Equity Fund.......................................................................................B-23
Valuation of International Securities......................................................................B-24
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.................................................................B-24
Matters Affecting Redemption...............................................................................B-25
ADDITIONAL TAX INFORMATION.....................................................................................B-25
General ..................................................................................................B-25
Additional Tax Information Concerning the Global Asset Allocation Fund.....................................B-27
MANAGEMENT OF EUREKA FUNDS.....................................................................................B-29
Trustees and Officers......................................................................................B-29
Investment Adviser.........................................................................................B-29
Portfolio Transactions.....................................................................................B-30
Glass-Steagall Act.........................................................................................B-31
Administrator..............................................................................................B-32
Distributor................................................................................................B-33
Custodian..................................................................................................B-34
Transfer Agent and Fund Accounting Services................................................................B-34
Independent Accountants....................................................................................B-34
Legal Counsel..............................................................................................B-34
PERFORMANCE INFORMATION........................................................................................B-34
Yields of the Money Market Funds...........................................................................B-34
Yields of the Variable NAV Funds...........................................................................B-35
Calculation of Total Return................................................................................B-36
Performance Comparisons....................................................................................B-36
ADDITIONAL INFORMATION.........................................................................................B-37
</TABLE>
-i-
<PAGE> 62
<TABLE>
<S> <C>
Organization and Description of Shares.....................................................................B-37
Shareholder and Trustee Liability..........................................................................B-38
Miscellaneous..............................................................................................B-39
APPENDIX.......................................................................................................B-41
FINANCIAL STATEMENTS...........................................................................................B-48
</TABLE>
-ii-
<PAGE> 63
STATEMENT OF ADDITIONAL INFORMATION
EUREKA FUNDS
Eureka Funds is an open-end management investment company. The
Eureka Funds consist of five series of units of beneficial interest ("Shares")
offered to the public, each representing interests in one of five separate
investment portfolios: the Eureka U.S. Treasury Obligations Fund (the "U.S.
Treasury Obligations Fund"), the Eureka Prime Money Market Fund (the "Prime
Money Market Fund" and together with the U.S. Treasury Obligations Fund, the
"Money Market Funds"), the Eureka Investment Grade Bond Fund (the "Investment
Grade Bond Fund"), the Eureka Global Asset Allocation Fund (the "Global Asset
Allocation Fund"), and the Eureka Equity Fund (the "Equity Fund"). Each Fund
offers to the public two classes of Shares: Class A Shares and Trust Shares.
Most information contained in this Statement of Additional Information expands
on subjects discussed in the Prospectuses. Capitalized terms not defined herein
are defined in the Prospectuses. An investment in Shares of a Fund should not
be made without first reading the applicable Prospectuses.
INVESTMENT OBJECTIVE AND POLICIES
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the information pertaining to
portfolio instruments of each Fund as set forth in the Prospectuses.
The Appendix to this Statement of Additional Information identifies
nationally recognized statistical ratings organizations ("NRSROs") that may be
used by Sanwa Bank California, the Eureka Funds' investment adviser ("SBCL"),
with regard to portfolio investments for the Funds and provides a description
of relevant ratings assigned by each such NRSRO. A rating by an NRSRO may be
used only where the NRSRO is neither controlling, controlled by, nor under
common control with the issuer of, or any issuer, guarantor, or provider of
credit support for, the instrument.
ASSET-BACKED SECURITIES. Asset-backed securities are secured by company
receivables, home equity loans, truck or auto loans, leases, credit card
receivables and other securities backed by receivables or assets.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are
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generally issued in multiple-classes. Cash-flow from the underlying receivables
is directed first to paying interest and then to retiring principal via paying
down the two respective classes of notes sequentially. Cash-flows on
fixed-payment CARS are certain, while cash-flows on other types of CARS issues
depends on the prepayment rate of the underlying automobile loans. Prepayments
of automobile loans are triggered mainly by automobile sales and tradeins. Many
people buy new cars every two or three years, leading to rising prepayment rates
as a pool becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period. The CARDS principal balance remains constant during this
period, while any cardholder repayments or new borrowings flow to the issuer's
participation. Once the principal amortization phase begins, the balance
declines with paydowns on the underlying portfolio. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the
underlying assets or provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and over
collateralization.
BANKERS' ACCEPTANCES AND CERTIFICATES OF DEPOSIT. All of the Funds
except the U.S. Treasury Obligations Fund may invest in bankers' acceptances,
certificates of deposit, and demand and time deposits. Bankers' acceptances are
negotiable drafts or bills of exchange typically 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. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank or a savings
and loan association for a definite period of time and earning a specified
return.
Bankers' acceptances will be those guaranteed by domestic and foreign
banks, if at the time of investment such banks have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements). Certificates of deposit and demand and
time deposits will be those of domestic and foreign banks and savings and loan
associations, if (a) at the time of investment they have capital,
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surplus, and undivided profits in excess of $100,000,000 (as of the date of
their most recently published financial statements) or (b) the principal amount
of the instrument is insured in full by the Federal Deposit Insurance
Corporation.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage
obligations ("CMOs") are mortgage-related securities which are structured pools
of mortgage pass-through certificates or mortgage loans. CMOs are issued with a
number of classes or series which have different maturities and which may
represent interests in some or all of the interest or principal on the
underlying collateral or a combination thereof. CMOs of different classes are
generally retired in sequence as the underlying mortgage loans in the mortgage
pool are repaid. In the event of sufficient early prepayments on such mortgages,
the class or series of CMOs first to mature generally will be retired prior to
its maturity. Thus, the early retirement of a particular class or series of CMO
held by a Fund would have the same effect as the prepayment of mortgages
underlying a mortgage-backed pass-through security.
Certain debt securities such as, but not limited to, mortgage-backed
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, are expected to be
repaid prior to their stated maturity dates. As a result, the effective maturity
of these securities is expected to be shorter than the stated maturity. For
purposes of calculating a Fund's weighted average portfolio maturity, the
effective maturity of such securities will be used.
CMOs include stripped mortgage securities, which are derivative
multi-class mortgage securities issued by agencies or instrumentalities of the
U.S. government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
mortgage securities are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of stripped mortgage security will have one class
receiving all of the interest from the mortgage assets (the interest-only or
"IO" class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on the securities' yield to maturity. Generally,
the market value of the PO class is unusually volatile in response to changes in
interest rates. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the security is rated in the
highest rating category.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not fully developed. Stripped mortgage
securities issued or guaranteed by the U.S. government and held by a Fund
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may be considered liquid securities pursuant to guidelines established by the
Board of Trustees.
COMMERCIAL PAPER. Each Fund, except for the U.S. Treasury Obligations
Fund, may invest in commercial paper. Commercial paper consists of unsecured
promissory notes issued by corporations. Commercial paper usually has a maturity
of less than nine months and has a fixed rates of return.
The Prime Money Market Fund, the Investment Grade Bond Fund, and the
Global Asset Allocation Fund may purchase commercial paper designated as
"Section 4(2) paper," a term that includes debt obligations issued in reliance
on the "private placement" exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. Section 4(2) paper is restricted as to
disposition under the Federal securities laws, and is frequently sold (and
resold) to institutional investors through or with the assistance of investment
dealers who make a market in the Section 4(2) paper. Certain transactions in
Section 4(2) paper may qualify for the registration exemption provided in Rule
144A under the Securities Act of 1933.
COMMON AND PREFERRED STOCK. Stocks represent shares of ownership in a
company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments and
on assets should the company be liquidated. After other claims are satisfied,
common stockholders participate in company profits on a pro rata basis; profits
may be paid out in dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay a dividend, the Funds may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividend. Such investments
would be made primarily for their capital appreciation potential.
FOREIGN CURRENCY TRANSACTIONS. The Global Asset Allocation Fund may use
forward foreign currency exchange contracts. Forward foreign currency exchange
contracts involve an obligation to purchase or sell a specified currency at a
future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but instead allow a Fund to establish a rate of exchange for a future point in
time. The Fund may use forward foreign currency exchange contracts to hedge
against movements in the value of foreign currencies (including the "ECU" used
in the European Community) relative to the U.S. dollar in connection with
specific portfolio transactions or with respect to portfolio positions. The Fund
may enter into forward foreign currency exchange contracts when deemed advisable
by SBCL under two circumstances. First, when entering into a contract for the
purchase or sale of a security, the Fund may enter into a forward foreign
currency exchange contract for the amount of the purchase or sale price to
protect against variations, between the date the security is purchased or sold
and the date on which payment is made or received, in the value of the foreign
currency relative to the U.S. dollar or other foreign currency.
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Second, when SBCL anticipates that a particular foreign currency may
decline relative to the U.S. dollar or other leading currencies, in order to
reduce risk, the Fund may enter into a forward contract to sell, for a fixed
amount, the amount of foreign currency approximating the value of some or all of
the Fund's securities denominated in such foreign currency. With respect to any
forward foreign currency contract, it will not generally be possible to match
precisely the amount covered by the contract and the value of the securities
involved due to the changes in the values of such securities resulting from
market movements between the date the forward contract is entered into and the
date it matures. In addition, while forward contracts may offer protection from
losses resulting from declines in the value of a particular foreign currency,
they also limit potential gains which might result from increases in the value
of such currency. The Fund will also incur costs in connection with forward
foreign currency exchange contracts and conversions of foreign currencies and
U.S. dollars.
A separate account of a Fund consisting of liquid assets equal to the
amount of the Fund's assets that could be required to consummate forward
contracts entered into under the second circumstance, as set forth above, will
be established with the Fund's custodian. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market or fair value. If the market or fair value of such securities
declines, additional cash or securities will be placed in the account daily so
that the value of the account will be equal the amount of such commitments by
the Fund.
FOREIGN INVESTMENT. The Funds, other than the U.S. Treasury Obligations
Fund, may invest in certain obligations or securities of foreign issuers.
Permissible investments include Eurodollar Certificates of Deposit ("ECDs")
which are U.S. dollar denominated certificates of deposit issued by branches of
foreign and domestic banks located outside the United States, Yankee
Certificates of Deposit ("Yankee CDs") which are certificates of deposit issued
by a U.S. branch of a foreign bank, denominated in U.S. dollars and held in the
United States, Eurodollar Time Deposits ("ETD's") which are U.S. dollar
denominated deposits in a foreign branch of a U.S. bank or a foreign bank, and
Canadian Time Deposits ("CTD's") which are U.S. dollar denominated certificates
of deposit issued by Canadian offices of major Canadian banks, Canadian
commercial paper, which is commercial paper issued by a Canadian corporation or
a Canadian counterpart of a U.S. corporation, and European commercial paper,
which is U.S. dollar denominated commercial paper of an issuer located in
Europe. The Funds may invest in foreign commercial paper, including Canadian and
European commercial paper as described above. The Prime Money Market Fund, the
Equity Fund and the Global Asset Allocation Fund may also purchase foreign
equity securities, including ADRs (sponsored and unsponsored), European
Depository Receipts ("EDRs") and Global Depository Receipts ("GDRs").
Investments in securities issued by foreign branches of U.S. banks,
foreign banks, or other foreign issuers, including American Depository Receipts
("ADRs") and securities purchased on foreign securities exchanges, may subject a
Fund to additional investment risks. Such risks include adverse political and
economic developments, possible seizure, currency
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blockage, nationalization or expropriation of foreign investments, less
stringent disclosure requirements, exchange control regulations, non-U.S.
withholding taxes and the adoption of other foreign governmental restrictions.
Additional risks include currency exchange risks, less publicly
available information, the risk that companies may not be subject to the
accounting, auditing and financial reporting standards and requirements of U.S.
companies, the risk that foreign securities markets may have less volume and
therefore may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks. The Funds will acquire
such securities only when SBCL believes the risks associated with such
investments are minimal.
FUTURES CONTRACTS AND RELATED OPTIONS. The Investment Grade Bond Fund,
the Global Asset Allocation Fund and the Equity Fund (the "Variable NAV Funds")
may invest in futures contracts and options thereon (interest rate futures
contracts or index futures contracts, as applicable). Positions in futures
contracts may be closed out only on an exchange which provides a secondary
market for such futures. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any specific
time. Thus, it may not be possible to close a futures position. In the event of
adverse price movements, a Fund would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if a Fund has
insufficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Fund may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on a Fund's ability to effectively hedge.
Successful use of futures by the Funds is also subject to SBCL's
ability to correctly predict the direction the market will move. For example, if
a Fund has hedged against the possibility of a decline in the market adversely
affecting securities held by it and securities prices increase instead, a Fund
will lose part or all of the benefit to the increased value of its securities
which it has hedged because it will have approximately equal offsetting losses
in its futures positions. In addition, in some situations, if a Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the
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time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit, before any
deduction for the transaction costs, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract.
Utilization of futures transactions by a Fund involves the risk of loss
by a Fund of margin deposits in the event of bankruptcy of a broker with whom a
Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement, during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
to impossible to liquidate existing positions or to recover excess variation
margin payments.
GUARANTEED INVESTMENT CONTRACTS. Guaranteed investment contracts
("GICs") are issued by highly rated U.S. insurance companies. Under these
contracts, a Fund makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits interest to the
Fund on a monthly basis, which is based on an index (such as the Solomon
Brothers CD Index), but is guaranteed not to be less than a certain minimum
rate.
ILLIQUID AND RESTRICTED SECURITIES. Some investments may be determined
by SBCL, under the supervision of the Board of Trustees, to be illiquid.
Securities may be deemed illiquid if the Fund cannot reasonably expect within
seven days to sell the securities for approximately the amount at which the Fund
values such securities. The sale of illiquid securities, if they can be sold at
all, generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities such as securities eligible for trading on U.S. securities exchanges
or in over-the-
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counter markets. Moreover, restricted securities, which may be
illiquid, often sell, if at all, at a price lower than similar securities that
are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions
contained in the securities laws of other countries. However, securities that
are freely marketable in the country where they are principally traded, but
would not be freely marketable in the United States, will not be considered
illiquid. Where registration is required, the Fund may be obligated to pay all
or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, including private placements,
repurchase agreements, commercial paper, foreign securities and corporate bonds
and notes. These instruments are often restricted securities because the
securities are sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
INVESTMENT COMPANY SECURITIES. By investing in other investment
companies, a Fund becomes exposed to the risks of that investment company's
portfolio of securities. Securities of other investment companies will be
acquired by the Funds within the limits prescribed by the 1940 Act. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory
fees and other expenses the Fund bear directly in connection with its own
operations.
INVESTMENT GRADE DEBT OBLIGATIONS. The Variable NAV Funds may invest in
"investment grade securities," which are securities rated in the four highest
rating categories of an NRSRO. It should be noted that debt obligations rated in
the lowest of the top four ratings (i.e., "Baa" by Moody's) are considered to
have some speculative characteristics and are more sensitive to economic change
than higher rated securities. Under normal circumstances at least 80% of the
Fund's assets will be invested in investment grade debt securities. The Fund
will only invest in securities that, at the time of initial investment, are
rated equal to or greater than BBB- by Standard & Poor's or Baa3 by Moody's.
The Fund will only invest in unrated debt securities should SBCL determine that
the security is of comparable quality to an investment grade issue. The Fund
will not invest in securities that, at the time of initial investment, do not
meet the above credit guidelines. Securities that are subsequently downgraded
in quality below investment grade by both Standard & Poor's and Moody's may
continue to be held in the portfolio, and will be sold only if SBCL believes it
would be advantageous to do so. Securities rated less than BBB- by Standard &
Poor's and Baa3 by Moody's are classified as non-investment grade securities.
Such securities carry a high degree of risk and are considered speculative by
the major credit ratings agencies. Credit quality in the non-investment grade
bond market can change suddenly and unexpectedly and even recently issued
credit rating may not fully reflect the actual risks posed by a particular
non-investment grade security.
MUNICIPAL OBLIGATIONS. Municipal securities are debt securities issued
by a state, its political subdivisions, agencies, authorities and corporations.
Municipal securities include debt obligations issued to obtain funds for various
public purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass transportation,
public utilities, schools, streets, and water and sewer works. Other
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public purposes for which Municipal securities may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
obtaining funds to loan to other public institutions and facilities.
Municipal securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities.
Municipal securities are generally classified as "general obligation"
or "revenue." General obligation securities are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Private activity bonds and
industrial development bonds that are municipal securities are in most cases
revenue bonds and generally do not constitute the pledge of the credit of the
issuer of such bonds.
Municipal notes are instruments issued by or on behalf of governments
and political sub-divisions thereof. Examples include: tax anticipation notes
("TANS"), which are short-term debt instruments issued by a municipality or
state to finance working capital needs of the issuer in anticipation of
receiving taxes on a future date; revenue anticipation notes ("RANS"), which are
short-term debt instruments issued by a municipality or state to provide cash
prior to receipt of expected non-tax revenues from a specific source; bond
anticipation notes ("BANS"), which are short-term debt instruments issued by a
municipality or state that will be paid off with the proceeds of an upcoming
bond issue; and tax revenue anticipation notes ("TRANS"), which are short-term
debt instruments issued by a municipality or state to finance working capital
needs in anticipation of receiving taxes or other revenues. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer.
Taxable municipal securities are municipal securities the interest on
which is not exempt from federal income tax. Taxable municipal securities may
include "private activity bonds" that are issued by or on behalf of states or
political subdivisions thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and pollution control and to
finance facilities for charitable institutions. The payment of the principal and
interest on private activity bonds is not backed by a pledge of tax revenues,
and is dependent solely on the ability of the facility's user to meet its
financial obligations. Taxable municipal securities also may include remarketed
certificates of participation.
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The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Municipal securities also include participation certificates in a
lease, an installment purchase contract, or a conditional sales contract ("lease
obligations") entered into by a state or political subdivision to finance the
acquisition or construction of equipment, land or facilities. Although lease
obligations are not general obligations of the issuer for which the state or
other governmental body's unlimited taxing power is pledged, certain lease
obligations are backed by a covenant to appropriate money to make the lease
obligation payments. However, under certain lease obligations, the state or
governmental body has no obligation to make these payments in future years
unless money is appropriated on a yearly basis. Although "non-appropriation"
lease obligations are secured by the leased property, disposition of the
property in the event of foreclosure might prove difficult. These securities
represent a relatively new type of financing that is not yet marketable as more
conventional securities. Certain investments in lease obligations may be
illiquid. Under guidelines established by the Board of Trustees, the following
factors will be considered when determining the liquidity of a lease obligation:
(1) the frequency of trades and quotes for the obligation; (2) the number of
dealers willing to purchase or sell the obligation and the number of potential
buyers; (3) the willingness of dealers to undertake to make a market in the
obligation; and (4) the nature of the marketplace trades.
OPTIONS - CALLS AND PUTS.
Calls. The Variable NAV Funds may write (sell) "covered" call options
and purchase options to close out options previously written by it. Such options
must be listed on a National Securities Exchange and issued by the Options
Clearing Corporation. The purpose of writing covered call options is to generate
additional income. This income will serve to enhance each Fund's total return
and will reduce the effect of any price decline of the security involved in the
option. Covered call options will generally be written on securities which, in
SBCL's opinion, are not expected to make any major price moves in the near
future but which, over the long term, are deemed to be attractive investments
for the Funds.
A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the writer to deliver
the underlying security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure the writer's obligation to deliver
the underlying security in the case of a call option, a writer is
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required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation. The Funds will
write only covered call options. This means that a Fund will only write a call
option on a security which it already owns. In order to comply with the
requirements of the securities laws in several states, a Fund will not write a
covered call option if, as a result, the aggregate market value of all portfolio
securities covering call options or subject to put options exceeds 25% of the
market value of its net assets.
The Variable NAV Funds will write call options only if they are
"covered" and may buy call options. In the case of a call option on a security,
the option is "covered" if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount as are held in a segregated account by its custodian)
upon conversion or exchange of other securities held by it. For a call option on
an index, the option is covered if the Fund maintains with its custodian cash or
cash equivalents equal to the contract value. A call option is also covered if
the Fund holds a call on the same security or index as the call written where
the exercise price of the call held is (i) equal to or less than the exercise
price of the call written, or (ii) greater than the exercise price of the call
written provided the difference is maintained by the Fund in cash or cash
equivalents in a segregated account with its custodian.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options which the Funds will not do), but
capable of enhancing a Fund's total return. When writing a covered call option,
a Fund, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but retains
the risk of loss should the price of the security decline. Unlike owning
securities not subject to an option, a Fund does not have any control over the
point at which it may be required to sell the underlying securities, because it
may be assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which a Fund has written expires, the
Fund will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security during the
option period. If the call option is exercised, a Fund will realize a gain or
loss from the sale of the underlying security. The security covering the call
will be maintained in a segregated account by the Fund's custodian. A Fund does
not consider a security covered by a call to be "pledged" as that term is used
in its policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium a
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once
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the decision to write a call option has been made, SBCL, in determining whether
a particular call option should be written on a particular security, will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for the option. The premium received by a
Fund for writing covered call options will be recorded as a liability in a
Fund's statement of assets and liabilities. This liability will be readjusted
daily to the option's current market value, which will be the latest sale price
at the time at which the net asset value per share of a Fund is computed (close
of the New York Stock Exchange (the "NYSE")), or, in the absence of such sale,
the latest asked price (or, with respect to the Global Asset Allocation Fund,
the mean between the last bid and asked prices). The liability will be
extinguished upon expiration of the option, the purchase of an identical option
in the closing transaction, or delivery of the underlying security upon the
exercise of the option.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
or to permit the sale of the underlying security. Furthermore, effecting a
closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration date or
both. If a Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will seek to effect a closing transaction
prior to, or concurrently with, the sale of the security. There is, of course,
no assurance that a Fund will be able to effect such closing transactions at a
favorable price. If a Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case it
would continue to be at market risk on the security. This could result in higher
transaction costs. A Fund will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by a Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, a Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
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Puts. A put is a right to sell a specified security (or securities)
within a specified period of time at a specified exercise price. To the extent
consistent with its investment objective, the Variable NAV Funds may buy put
options and write secured put options.
The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period.
These options may relate to particular securities, financial
instruments, foreign currencies, stock or bond indices or the yield differential
between two securities, and may or may not be listed on a 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 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.
Cross hedging is the use of options or forward contracts in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency based on a belief that there is a pattern of correlation between the
two currencies. The Funds intend to enter into puts only with dealers, banks,
and broker-dealers which, in SBCL's opinion, present minimal credit risks.
Risk Factors Relating to Options. There are several risks associated
with transactions in put and call 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 not to
achieve its objectives. In addition, a liquid secondary market for particular
options, whether traded over-the-counter or on a national securities exchange
("Exchange") may be absent for reasons which include the following: 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; 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 volume; or one or more Exchanges
could, for economic or other reasons, decide or be compelled at some future date
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.
In addition, the success of a hedging strategy based on options transactions may
depend on the ability of SBCL to predict movements in the prices of individual
securities, fluctuations in markets and movements in interest rates.
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REPURCHASE AGREEMENTS. Securities held by each of the Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from member banks of the Federal Deposit Insurance
Corporation with capital, surplus, and undivided profits of not less than
$100,000,000 (as of the date of their most recently published financial
statements) and from registered broker-dealers which SBCL deems creditworthy
under guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest) and SBCL will monitor the collateral's value to
ensure that it equals or exceeds the repurchase price (including accrued
interest). In addition, securities subject to repurchase agreements will be held
in a segregated account.
If the seller were to default on its repurchase obligation or become
insolvent, a Fund holding such obligation would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities held by the Fund were delayed pending court action.
Additionally, if the seller should be involved in bankruptcy or insolvency
proceedings, a Fund may incur delay and costs in selling the underlying security
or may suffer a loss of principal and interest if the Fund is treated as an
unsecured creditor and required to return the underlying security to the
seller's estate. Securities subject to repurchase agreements will be held by the
Eureka Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectuses, each
Fund may borrow funds for temporary purposes by entering into reverse repurchase
agreements in accordance with each Fund's investment restrictions. Pursuant to
such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. Each Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Such assets will include U.S. government
securities or other liquid high quality debt securities or high grade debt
securities. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which it is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.
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RIGHTS OFFERINGS AND WARRANTS TO PURCHASE. The Variable NAV Funds may
participate in rights offerings and may purchase warrants, which are privileges
issued by corporations enabling the owners to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. Subscription rights normally have a short life span to
expiration. The purchase of rights or warrants involves the risk that the Fund
could lose the purchase value of a right or warrant if the right to subscribe to
additional shares is not exercised prior to the rights' and warrants'
expiration. Also, the purchase of rights and/or warrants involves the risk that
the effective price paid for the right and/or 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. A 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. Warrants
acquired by a Fund in units or attached to other securities are not subject to
this restriction.
SECURITIES LENDING. While the lending of securities may subject a Fund
to certain risks, such as delays or the inability to regain the securities in
the event the borrower was to default on its lending agreement or enter into
bankruptcy, the Fund will receive 100% collateral in the form of cash or U.S.
government securities. This collateral will be valued daily by SBCL and should
the market value of the loaned securities increase, the borrower will furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower will pay the Fund any dividends or interest paid on such
securities. Loans are subject to termination by a Fund or the borrower at any
time. While a Fund will not have the right to vote securities on loan, the Funds
intend to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. The Funds will only enter into loan
arrangements with broker-dealers, banks or other institutions which SBCL has
determined are creditworthy under guidelines established by the Board of
Trustees.
SHORT-TERM TRADING. Short-term trading involves the selling of
securities held for a short time, ranging from several months to less than a
day. The object of such short-term trading is to increase the potential for
capital appreciation and/or income of the Funds in order to take advantage of
what SBCL believes are changes in market, industry or individual company
conditions or outlook. Any such trading would increase the portfolio turnover
rate of the Funds and their transaction costs.
SUPRANATIONAL ORGANIZATIONAL OBLIGATIONS. The Funds, other than the
U.S. Treasury Obligations Fund, may purchase debt securities of supranational
organizations such as the European Coal and Steel Community, the European
Economic Community and the World Bank, which are chartered to promote economic
development.
SWAPS. Swap agreements (a common form of derivatives) are contracts
between parties in which one party agrees to make payments to the other party
based on the change in market value of a specified index or asset. In return,
the other party agrees to make payments to the
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first party based on the return of a different specified index or asset.
Although swap agreements entail the risk that a party will default on its
payment obligations the Funds will minimize this risk by entering into
agreements that mark to market no less frequently than quarterly. Swap
agreements also bear the risk that the Funds will not be able to meet their
obligations to the counterparty. This risk will be mitigated by having the Funds
invest in the specific asset for which they are obligated to pay a return. Swap
agreements may be considered illiquid and therefore subject to a Fund's
limitation on illiquid securities.
U.S. GOVERNMENT OBLIGATIONS. The U.S. Treasury Obligations Fund will
invest exclusively in bills, notes and bonds issued or guaranteed by the U.S.
Treasury or agency obligations which are also supported by the full faith and
credit of the U.S. government. Each of the other Funds may invest in such
obligations and in other obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities. Such other obligations may
include those which are supported by the full faith and credit of the U.S.
government; others which are supported by the right of the issuer to borrow from
the Treasury; others which are supported by the discretionary authority of the
U.S. government to purchase the agency's obligations; and still others which are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. government would provide financial support to U.S.
government-sponsored agencies and instrumentalities if it is not obligated to do
so by law. A Fund will invest in the obligations of such agencies and
instrumentalities only when SBCL believes that the credit risk with respect
thereto is minimal.
U.S. GOVERNMENT SECURITIES. U.S. government securities include
obligations issued or guaranteed as to payment of principal and interest by the
full faith and credit of the U.S. government, such as Treasury bills, notes,
bonds and certificates of indebtedness, and obligations issued or guaranteed by
the agencies or instrumentalities of the U.S. government, but not supported by
such full faith and credit. Obligations of certain agencies and
instrumentalities of the U.S. government, such as GNMA and the Export-Import
Bank of the United States, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of FNMA, are supported by the right of the
issuer to borrow from the Treasury; others are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations; still
others, such as those of the Federal Farm Credit Banks, or the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. government would provide financial
support to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law.
U.S. government securities may include mortgage-backed pass-through
securities. Interest and principal payments (including prepayments) on the
mortgages underlying such securities are passed through to the holders of the
security. Prepayments occur when the borrower under an individual mortgage
repays the remaining principal before the mortgage's scheduled maturity date. As
a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed pass-through securities are often subject to more
rapid prepayments of principal than their stated maturity would indicate.
Because the prepayment
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characteristics of the underlying mortgages vary, it is not possible to predict
accurately the realized yield or average life of a particular issue of
pass-through certificates. Prepayments are important because of their effect on
the yield and price of the securities. During periods of declining interest
rates, such prepayments can be expected to accelerate, and the Funds would be
required to reinvest the proceeds at the lower interest rates then available. In
addition, prepayments of mortgages which underlie securities purchased at a
premium may not have been fully amortized at the time the obligation is repaid.
As a result of these principal prepayment features, mortgage-backed pass-through
securities are generally more volatile investments than other U.S. government
securities.
"Zero coupon" U.S. government securities also tend to be more volatile
than other types of U.S. government securities. Zero coupon securities are debt
instruments that do not pay current interest and are typically sold at prices
greatly discounted from par value. The return on a zero coupon obligation, when
held to maturity, equals the difference between the par value and the original
purchase price.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which the Funds, except for the U.S. Treasury Obligations Fund, may
invest are unsecured demand notes that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate according to the
terms of the instrument. They are also referred to as variable rate demand
notes. Because these notes are direct lending arrangements between the Fund and
the issuer, they are not normally traded. Although there may be no secondary
market in the notes, the Fund may demand payment of principal and accrued
interest at any time or during specified periods not exceeding one year,
depending upon the instrument involved, and may resell the note at any time to a
third party. The absence of such an active secondary market, however, could make
it difficult for a Fund to dispose of a variable amount master demand note if
the issuer defaulted on its payment obligations or during periods when the Fund
is not entitled to exercise their demand rights, and a Fund could, suffer a loss
to the extent of the default. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes must satisfy the
criteria for commercial paper. SBCL will consider the earning power, cash flow,
and other liquidity ratios of the issuers of such notes and will continuously
monitor their financial status and ability to meet payment on demand. Where
necessary to ensure that a note is of "high quality," a Fund will require that
the issuer's obligation to pay the principal of the note be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend. In
determining dollar-weighted average portfolio maturity, a variable amount master
demand note will be deemed to have a maturity equal to the period of time
remaining until the principal amount can be recovered from the issuer through
demand.
VARIABLE AND FLOATING RATE NOTES. The Funds, other than the U.S.
Treasury Obligations Fund, may acquire variable and floating rate notes, subject
to each Fund's investment objective, policies, and restrictions. A variable rate
note is one whose terms provide for the adjustment of its interest rate on set
dates and which, upon such adjustment,
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can reasonably be expected to have a market value that approximates its par
value. A floating rate note is one whose terms provide for the adjustment of
its interest rate whenever a specified interest rate changes and which, at any
time, can reasonably be expected to have a market value that approximates its
par value. Such notes are frequently not rated by credit rating agencies;
however, unrated variable and floating rate notes purchased by a Fund will be
determined by SBCL under guidelines established by the Board of Trustees to be
of comparable quality at the time of purchase to rated instruments eligible for
purchase under a Fund's investment policies. In making such determinations,
SBCL will consider the earning power, cash flow and other liquidity ratios of
the issuers of such notes (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, it may resell a
note at any time to a third party. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of a variable or
floating rate note in the event the issuer of the note defaulted on its payment
obligations and a Fund could, as a result or for other reasons, suffer a loss
to the extent of the default. Variable or floating rate notes may be secured by
bank letters of credit.
For purposes of the Money Market Funds, the maturities of the variable
and floating rate notes will be determined in accordance with Rule 2a-7 under
the 1940 Act.
WHEN-ISSUED SECURITIES. Each Fund may purchase securities on a
when-issued basis and may purchase and sell securities on a forward commitment
basis (I.E., for delivery beyond the normal settlement date at a stated price
and yield), including "TBA" (to be announced) purchase commitments. When a Fund
agrees to purchase securities on a when-issued or forward commitment basis, the
Fund's custodian will set aside cash or liquid portfolio securities equal to the
amount of the commitment in a separate account. Normally, the custodian will set
aside portfolio securities to satisfy the purchase commitment, and in such a
case, a Fund may be required subsequently to place additional assets in the
separate account in order to assure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that any such Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
When a Fund engages in when-issued or forward commitment transactions,
it relies on the seller to consummate the trade. Failure of the seller to do so
may result in the Fund incurring a loss or missing the opportunity to obtain a
price considered to be advantageous. In addition, the purchase of securities on
a when-issued or forward commitment basis involves a risk of loss if the value
of the security to be purchased declines prior to the settlement date. Each of
the Funds does not intend to purchase when-issued securities for speculative
purposes but only in furtherance of its investment objective.
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INVESTMENT RESTRICTIONS
For each Fund the following investment restrictions are fundamental and
cannot be changed without approval of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of that Fund.
1. The Fund may lend or borrow money to the extent permitted by the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
2. The Fund may pledge, mortgage or hypothecate any of its assets to
the extent permitted by the 1940 Act or the rules or regulations
thereunder, as such statute, rules or regulations may be amended from
time to time.
3. The Fund may issue senior securities to the extent permitted by the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
4. The Fund may purchase securities of any issuer only when consistent
with the maintenance of its status as a diversified company under the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
5. The Fund may not concentrate investments in a particular industry or
group of industries as concentration is defined under the 1940 Act, or
the rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.
6. The Fund may underwrite securities to the extent permitted by the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
7. The Fund may purchase or sell commodities, commodities contracts,
futures contracts, or real estate to the extent permitted by the 1940
Act or the rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.
ADDITIONAL INFORMATION REGARDING FUNDAMENTAL INVESTMENT RESTRICTIONS
The fundamental investment restrictions limit a Fund's ability to
engage in certain investment practices and purchase securities to the extent
permitted by, or consistent with, the 1940 Act. Relevant limitations of the 1940
Act are described below. Each Fund may be subject to more restrictive
non-fundamental investment policies. Non-fundamental investment policies may be
changed by the Board of Trustees.
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The following 1940 Act descriptions are to assist the investor in
understanding the fundamental restrictions above, and are not themselves
fundamental.
FUNDAMENTAL INVESTMENT RESTRICTION (1). The 1940 Act presently limits a
Fund's ability to borrow to one-third of the value of its total assets.
Borrowing by a Fund allows it to leverage its portfolio, which exposes it to
certain risks. Leveraging exaggerates the effect of any increase or decrease in
the value of portfolio securities on a Fund's net asset value, and money
borrowed will be subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances) which may or may not
exceed the interest received from the securities purchased with borrowed funds.
The 1940 Act also restricts the ability of any mutual fund to lend.
Under the 1940 Act, a Fund may only make loans if expressly permitted to do so
by the Fund's investment policies, and a Fund may not make loans to persons who
control or are under common control with the Fund. Thus, the 1940 Act
effectively prohibits a Fund from making loans to certain persons when conflicts
of interest or undue influence are most likely present. The Funds may, however,
make other loans which if made would expose shareholders to certain additional
risks.
FUNDAMENTAL INVESTMENT RESTRICTION (2). The 1940 Act limits a Fund's
ability to pledge, mortgage or hypothecate its assets to one-third of its
assets. To the extent that pledged assets are encumbered for more than seven
days such assets would be considered illiquid and, therefore, each Fund's use of
such techniques would be limited to 15% of its net assets (10% for the Money
Market Funds).
FUNDAMENTAL INVESTMENT RESTRICTION (3). The ability of a mutual fund to
issue senior securities is severely circumscribed by complex regulatory
constraints under the 1940 Act that restrict, for instance, the amount, timing,
and form of senior securities that may be issued. Because portfolio management
techniques involving the issuance of senior securities, such as the purchase of
securities on margin, short sales, or the writing of puts on portfolio
securities, are all techniques that involve the leveraging of a portfolio and
would not be consistent with the current SEC rules governing Money Market Funds.
FUNDAMENTAL INVESTMENT RESTRICTION (4). Under Section 5(b) of the 1940
Act, an investment company is diversified if, as to 75% of its total assets, no
more than 5% of the value of its total assets is invested in the securities of a
single issuer and no more than 10% of the issuer's voting securities is held by
the investment company. However, each of the Funds is subject to the "per
issuer" diversification requirements of the Internal Revenue Code of 1986
("Code") at the Fund's tax quarter-ends. Under the Code, the 5% "per issuer"
limit is applied only to 50% of a Fund's total assets (not 75% of total assets
as under the 1940 Act). However, no single issuer can exceed 25% of a Fund's
total assets under the Code as well.
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FUNDAMENTAL INVESTMENT RESTRICTION (5). "Concentration" is interpreted
under the 1940 Act to mean investment of 25% or more of a Fund's total assets in
a single industry. If a Fund were to "concentrate" its investments in a narrow
industry, investors would be exposed to greater risks because the Fund's
performance would be largely dependent on that segment's performance. None of
the Funds have reserved the right to concentrate in any industry.
FUNDAMENTAL INVESTMENT RESTRICTION (6). The 1940 Act prohibits a
diversified mutual fund from underwriting securities in excess of 25% of its
total assets.
FUNDAMENTAL INVESTMENT RESTRICTION (7). This restriction would permit
investment in commodities, commodities contracts, futures contracts, or real
estate to the extent permitted under the 1940 Act. However, it is unlikely, that
the Funds would make such investments. Each Fund would like the ability to
consider using these investment techniques in the future. Commodities, as
opposed to commodity futures, represent the actual underlying bulk goods, such
as grains, metals and food stuffs. Real estate-related instruments include real
estate investment trusts, commercial and residential mortgage-backed securities,
and real estate financings, and such instruments are generally sensitive to
factors such as changes in real estate values and property taxes, interest
rates, cash flow of underlying real estate assets, overbuilding, and the
management skill and creditworthiness of the issuer. Given the Funds' proposed
investment objective, the Funds do not expect to invest in these types of
investments; however, if a Fund did so invest, it would be exposed to these
types of risks associated with the underlying security.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose maturities at the time of acquisition were one year or
less. High portfolio turnover rates will generally result in higher transaction
costs to the Funds and may result in higher levels of taxable realized gains to
a Fund's shareholders. The portfolio turnover rate may vary greatly from year to
year as well as within a particular year, and may also be affected by cash
requirements for redemptions of Shares. Portfolio turnover will not be a
limiting factor in making investment decisions.
Because securities with maturities of less than one year are excluded
from the calculation of the portfolio turnover rate, the portfolio turnover rate
for each Money Market Fund is expected to be zero for regulatory and reporting
purposes.
VALUATION
The net asset value of each Fund is determined and its Shares are
priced as of the close of regular trading of the NYSE (generally 4:00 p.m.
Eastern time) on each Business Day
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("Valuation Times"). For each Money Market Fund, as used herein a "Business Day"
constitutes (i) any day on which the Federal Reserve Bank is open and the NYSE
is open for trading and (ii) any other day (other than a day during which no
Shares are tendered for redemption and no orders to purchase Shares are
received) during which there is sufficient trading in a Fund's portfolio
instruments that the Fund's net asset value per share might be materially
affected. For each other fund, a Business Day is (i) any day on which the NYSE
is open for trading and (ii) any other day (other than a day during which no
Shares are tendered for redemption and no orders to purchase Shares are
received) during which there is sufficient trading in a Fund's portfolio
instruments that the Fund's net asset value per share might be materially
affected. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by determining the value of the class's proportional
interest in the securities and other assets of a Fund, less (i) such class's
proportional share of general liabilities and (ii) the liabilities allocable
only to such class, and dividing such amount by the number of relevant class
Shares outstanding. Currently, the NYSE is closed on the customary national
business holidays of New Year's Day, Martin Luther King, Jr., Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
VALUATION OF THE MONEY MARKET FUNDS
The Money Market Funds use the amortized cost method of valuing their
securities. This involves valuing an instrument at its cost initially and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. This method may result in periods during which value,
as determined by amortized cost, is higher or lower than the price each Money
Market Fund would receive if it sold the instrument. The value of each Money
Market Fund's securities can be expected to vary inversely with changes in
prevailing interest rates.
Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that the Fund will not
purchase any security with a remaining maturity of more than thirteen months
(securities subject to repurchase agreements may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and each Money Market
Fund's investment objective, to stabilize the net asset value per Share for
purposes of sales and redemptions at $1.00. These procedures include review by
the Trustees, at such intervals as they deem appropriate, to determine the
extent, if any, to which the net asset value per Share deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires the Board of Trustees to promptly consider what action, if any, should
be initiated. If the Board of Trustees determines that the deviation from a
$1.00 price per Share may result in material dilution or other unfair results to
Shareholders, it will take the appropriate steps to eliminate or reduce these
consequences to the extent reasonably practicable. These steps may include
selling portfolio instruments prior to maturity in order to
B-22
<PAGE> 85
realize capital gains or losses to shorten the average portfolio maturity,
adjusting or withholding dividends or utilizing a net asset value per Share
determined by using available market quotations.
VALUATION OF THE INVESTMENT GRADE BOND FUND, THE GLOBAL ASSET ALLOCATION FUND
AND THE EQUITY FUND
Portfolio securities for which market quotations are readily available
are valued based upon their current available bid prices in the principal market
(closing sales prices if the principal market is an exchange) in which such
securities are normally traded. Unlisted securities for which market quotations
are readily available will be valued at the current quoted bid prices. Other
securities and assets for which quotations are not readily available, including
restricted securities and securities purchased in private transactions, are
valued at their fair market value in SBCL's best judgment under procedures
established by, and under the supervision of the Board of Trustees. A
Fund will value its investments in mutual funds securities at the redemption
price, which is net asset value.
Among the factors considered in valuing portfolio securities held by
the Funds, are the existence of restrictions upon the sale of the security by
the Fund, the absence of a market for the security, the extent of any discount
in acquiring the security, the estimated time during which the security will not
be freely marketable, the expenses of registering or otherwise qualifying the
security for public sale, underwriting commissions if underwriting would be
required to effect a sale, the current yields on comparable securities for debt
obligations traded independently of any equity equivalent, changes in the
financial condition and prospects of the issuer, and any other factors affecting
fair market value. In making valuations, opinions of counsel may be relied upon
as to whether or not securities are restricted securities and as to the legal
requirements for public sale.
The Eureka Funds may use a pricing service to value certain portfolio
securities where the prices provided are believed to reflect the fair market
value of such securities. A pricing service would normally consider such factors
as yield, risk, quality, maturity, type of issue, trading characteristics,
special circumstances and other factors it deems relevant in determining
valuations of normal institutional trading units of debt securities and would
not rely exclusively on quoted prices. The methods used by the pricing service
and the valuations so established will be reviewed by the Eureka Funds under the
general supervision of the Board of Trustees. Several pricing services
are available, one or more of which may be used by SBCL from time to time.
Investments in debt securities with remaining maturities of 60 days or
less may be valued based upon the amortized cost method.
B-23
<PAGE> 86
VALUATION OF INTERNATIONAL SECURITIES
Valuation of securities of foreign issuers is as follows: to the extent
sale prices are available, securities which are traded on a recognized stock
exchange, whether U.S. or foreign, are valued at the last sale price on that
exchange prior to the time when assets are valued or prior to the close of
regular trading hours on the NYSE. In the event that there are no sales, the
means between the last available bid and asked prices will be used. If a
security is traded on more than one exchange, the last sale price on the
exchange where the stock is primarily traded is used. An option or futures
contract is valued at the last sales price prior to 4:00 p.m. Eastern time, as
quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, the mean between the last bid
and asked prices prior to 4:00 p.m. Eastern time. In the event that application
of these methods of valuation results in a price for a security which is deemed
not to be representative of the market value of such security, the security will
be valued by, under the direction of or in accordance with a method specified by
the Board of Trustees as reflecting fair value. The amortized cost method of
valuation will be used with respect to debt obligations with sixty days or less
remaining to maturity unless SBCL under the supervision of the Board of Trustees
determines such method does not represent fair value. All other assets and
securities held by the Fund (including restricted securities) are valued at fair
value as determined in good faith by the Board of Trustees or by someone under
its direction. Any assets which are denominated in a foreign currency are
translated into U.S. dollars at the prevailing market rates.
Certain of the securities acquired by the Global Asset Allocation Fund
may be traded on foreign exchanges or over-the-counter markets on days on which
the Fund's net asset value is not calculated. In such cases, the net asset value
of the Fund's shares may be significantly affected on days when investors can
neither purchase nor redeem shares of the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each class of Shares of the Funds are sold on a continuous basis by
BISYS Fund Services, Inc. ("BISYS"). In addition to purchasing Shares directly
from BISYS, Class A or Trust Shares may be purchased through procedures
established by BISYS in connection with the requirements of accounts at SBCL, or
SBCL's affiliated or correspondent banks. Customers purchasing Shares of the
Eureka Funds may include officers, directors, or employees of SBCL or SBCL's
affiliated or correspondent banks.
MATTERS AFFECTING REDEMPTION
The Eureka Funds may suspend the right of redemption or postpone the
date of payment for Shares during any period when (a) trading on the NYSE is
restricted by applicable rules and regulations of the Securities and Exchange
Commission, (b) the NYSE is closed for other than
B-24
<PAGE> 87
customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists
as a result of which (i) disposal by the Eureka Funds of securities owned by it
is not reasonably practical or (ii) it is not reasonably practical for the
Company to determine the fair market value of its total net assets.
The Eureka Funds may redeem any class of Shares involuntarily if
redemption appears appropriate. See "Valuation of the Money Market Funds"
above.
ADDITIONAL TAX INFORMATION
GENERAL
It is the policy of each of the Funds to qualify for the favorable tax
treatment accorded regulated investment companies (a "RIC") under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). By qualifying as
a RIC, each Funds expects to eliminate or reduce to a nominal amount its federal
income taxes.
In order to qualify as a RIC, a Fund must (a) derive at least 90% of
its gross income from dividends, interest, payments with respect to certain
securities loans, and gains from the sale of stock, securities, and foreign
currencies, or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of investing
in such stock, securities, or currencies; (b) derive less than 30% of its gross
income from the sale or other disposition of certain assets (including stocks
and securities) held for less than three months; (c) distribute each year at
least 90% of its dividend, interest (including tax-exempt interest), and certain
other income and the excess, if any, of its net short-term capital gains over
its net long-term capital losses; and (d) diversify its holdings so that, at the
end of each fiscal quarter (i) at least 50% of the market value of its assets is
represented by cash, cash items, U.S. government securities, securities of other
RICs, and other securities, limited in respect of any one issuer to a value not
greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities (other than those of the U.S.
government or other RICs) of any one issuer or of two or more issuers which the
Fund controls and which are engaged in the same, similar, or related trades or
businesses. The 30% of gross income test described above may restrict a Fund's
ability to sell certain assets held (or considered under Code rules to have been
held) for less than three months and to engage in certain hedging transactions
(including hedging transactions in options and futures) that in some
circumstances could cause certain Fund assets to be treated as held for less
than three months.
A non-deductible excise tax is imposed on RICs that do not distribute
in each calendar year (regardless of whether they have a non-calendar taxable
year) an amount equal to 98% of their "ordinary income" (as defined) for the
calendar year plus 98% of their capital gain net
B-25
<PAGE> 88
income for the 1-year period ending on October 31 of such calendar year plus any
undistributed amounts from prior years. For the foregoing purposes, a Fund is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year. If distributions during a
calendar year by a Fund were less than the required amount, the Fund would be
subject to a non-deductible excise tax equal to 4% of the deficiency.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends and other distributions paid to any
Shareholder who has provided either an incorrect taxpayer identification number
or no number at all, who is subject to withholding by the Internal Revenue
Service for failure properly to report payments of interest or dividends, or who
fails to provide a certified statement that he or she is not subject to "backup
withholding."
A Fund's transactions in futures contracts, options, and
foreign-currency-denominated securities, and certain other investment and
hedging activities of the Fund, will be subject to special tax rules (including
"mark-to-market," "straddle," "wash sale," and "short sale" rules), the effect
of which may be to accelerate income to the Fund, defer losses to the Fund,
cause adjustments in the holding periods of the Fund's assets, convert
short-term capital losses into long-term capital losses, and otherwise affect
the character of the Fund's income. These rules could therefore affect the
amount, timing, and character of distributions to Shareholders. Income earned as
a result of these transactions would, in general, not be eligible for the
dividends received deduction or for treatment as exempt-interest dividends when
distributed to Shareholders. The Funds will endeavor to make any available
elections pertaining to these transactions in a manner believed to be in the
best interest of the Funds.
Investment by the Fund in "passive foreign investment companies" could
subject the Fund to federal income tax or other charge on the proceeds from the
sale of its investment in such a company; however, this tax can be avoided by
making an election to mark such investments to market annually or to treat the
passive foreign investment company as a "qualified electing fund."
A "passive foreign investment company" is any foreign corporation: (i)
75 percent or more of the income of which for the taxable year is passive
income, or (ii) the average percentage of the assets of which (generally by
value, but by adjusted tax basis in certain cases) that produce or are held for
the production of passive income is at least 50 percent. Generally, passive
income for this purpose means dividends, interest (including income equivalent
to interest), royalties, rents, annuities, the excess of gains over losses from
certain property transactions and commodities transactions, and foreign currency
gains. Passive income for this purpose does not include rents and royalties
received by the foreign corporation from active business and certain income
received from related persons.
B-26
<PAGE> 89
Although each Fund expects to qualify as a RIC and to be relieved of
all or substantially all Federal income taxes, depending upon the extent of
their activities in states and localities in which their offices are maintained,
in which their agents or independent contractors are located, or in which they
are otherwise deemed to be conducting business, the Funds may be subject to the
tax laws of such states or localities. If for any taxable year a Fund does not
qualify for the special federal tax treatment afforded a RIC, all of its taxable
income will be subject to federal income tax at regular corporate rates at the
Fund level (without any deduction for distributions to its Shareholders). In
addition, distributions to Shareholders will be taxed as ordinary income even if
the distributions are attributable to capital gains or exempt interest earned by
the Fund.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of the Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax advisers. In addition, the tax discussion in the Prospectuses and this
Statement of Additional Information is based on tax laws and regulations which
are in effect on the date of the Prospectuses and this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE GLOBAL ASSET ALLOCATION FUND
Special rules govern the federal income tax treatment of the portfolio
transactions of the Global Asset Allocation Fund that are denominated in terms
of a currency other than the U.S. dollar or determined by reference to the value
of one or more currencies other than the U.S. dollar. The types of transactions
covered by the special rules include the following: (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury regulations, certain preferred stock); (ii) the
accruing of certain trade receivables and payables; (iii) the entering into or
acquisition of any forward contract or similar financial instruments; and (iv)
the entering into or acquisition of any futures contract, option or similar
financial instrument, if such instrument is not marked-to-market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer also is
treated as a transaction subject to the special currency rules. With respect to
such transactions, foreign currency gain or loss is calculated separately from
any gain or loss on the underlying transaction and is normally taxable as
ordinary gain or loss. A taxpayer may elect to treat as capital gain or loss
foreign currency gain or loss arising from certain identified forward contracts
that are capital assets in the hands of the taxpayer and which are not part of a
straddle ("Capital Asset Election"). In accordance with Treasury regulations,
certain transactions with respect to which the taxpayer has not made the Capital
Asset Election and that are part of a "988 hedging transaction" (as defined in
the Code and the Treasury regulations) are integrated and treated as a single
transaction or otherwise treated consistently
B-27
<PAGE> 90
for purposes of the Code. "988 hedging transactions" (as identified by such
Treasury regulations) are not subject to the market-to-market or loss deferral
rules under the Code. Some of the non-U.S. dollar-denominated investments that
the Fund may make (such as non-U.S. dollar-denominated debt securities and
obligations and preferred stock) and some of the foreign currency contracts the
Fund may enter into will be subject to the special currency rules described
above. Gain or loss attributable to the foreign currency component of
transactions engaged in by a Fund which is not subject to the special currency
rules (such as foreign equity investments other than certain preferred stocks)
will be treated as capital gain or loss and will not be segregated from the gain
or loss on the underlying transaction.
In addition, certain forward foreign currency contracts held by the
Fund at the close of the Fund's taxable year will be subject to "mark-to-market"
treatment. If the Fund makes the Capital Asset Election with respect to such
contracts, any gain or loss with respect to the contract shall be treated as
short-term capital gain or loss, to the extent of 40% of such gain or loss, and
long-term capital gain or loss, to the extent of 60% of such gain or loss.
Otherwise, such gain or loss will be ordinary in nature. To receive such federal
income tax treatment, a foreign currency contract must meet the following
conditions: (1) the contract must require delivery of a foreign currency of a
type in which regulated futures contracts are traded or upon which the
settlement value of the contract depends; (2) the contract must be entered into
at arm's length at a price determined by reference to the price in the interbank
market; and (3) the contract must be traded in the interbank market. The
Treasury Department has broad authority to issue regulations under these
provisions respecting foreign currency contracts. Forward foreign currency
contracts entered into by the Fund also may result in the creation of one or
more straddles for federal income tax purposes, in which case certain loss
deferral, short sales, and wash sales rules and requirements to capitalize
interest and carrying charges may apply.
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<PAGE> 91
MANAGEMENT OF THE EUREKA FUNDS
TRUSTEES AND OFFICERS
The Trustees and officers of each Fund, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position with the Principal occupation
Name/Age Eureka Funds
<S> <C> <C>
Larry D. Layne Trustee; Chairman of the Group Executive Vice President/Head
56 Board Relationship Banking Group - Sanwa
Bank California, 1992-Present
Masaki "Mike" Horioka Trustee Senior Vice President, Office of the
42 President - Sanwa Bank California,
1996-Present; General Manager of
Planning and Administration
Department - Sanwa Investment Trust
Management Co., Ltd., 1993-1996
Donal H. Livingston Trustee Professor - Marriott School of
55 Business, 1994-1997; Director -
Center for Entrepreneurship,
1994-1997; Partner - Arthur
Andersen LLP, 1976-1995
Walter F. Beran Trustee Chairman - Pacific Alliance Group,
71 Present; Chairman - Optimatrix Health
Solutions, Inc., Present; Board Member -
ARCO Chemical Company, Present;
Board Member - Compensation
Resource Group, Present; Board
Member - Fleetwood Enterprises, Inc.,
Present; Board Member - Pacific
Scientific Company, Present; Board
Member - Vencor, Inc., Present;
Retired - Ernst & Whinney, 1986
David L. Buell Trustee Principal Organizer - Prime Bank
61 (Expected to open in 1998), Present;
Owner (50%) - Prime, LLC, 1996-
Present; Founder, Chairman & CEO -
Metrobank, 1978-1996
Irimga McKay President Senior Vice President, July 1993 to
37 date, prior thereto First Vice
President of the Administrator and
Distributor, November 1988 to July
1993; Regional Vice President,
Continental Equities, June 1987 to
November 1988; Assistant Wholesaler,
VMS Realty Partners (a real estate
limited partnership), May 1986 to
June 1987
Greg Maddox Vice President Director of BISYS Fund Services,
29 1991-Present
Eileen Walther Vice President Vice President of Accounting Services
44 of BISYS Fund Services, 1996-Present;
Assistant Vice President of Templeton
International, 1984-1995
Thresa Dewar Secretary Vice President/Treasurer of
43 Administration and Regulatory Services
of BISYS Fund Services, 1997-Present;
President, Healthy You Food Market of
Marco, Inc., 1994-1997; Vice President
and Controller, Federated
Administrative Services, 1974-1994
Alaina V. Metz Assistant Secretary Chief Administrative Officer of BISYS
30 Fund Services - Blue Sky Compliance,
1995-Present; Alliance Capital
Management, L.P., 1989-1995
Martin R. Dean Treasurer Vice President of Administration and
34 Regulatory Services of BISYS Fund
Services, 1994-Present; Senior
Manager, KPMG Peat Marwick LLP,
1987-1994
</TABLE>
The officers of the Eureka Funds receive no compensation directly from
the Eureka Funds for performing the duties of their offices. BISYS receives
fees from the Eureka Funds for acting as Administrator and receives fees from
the Eureka Funds for acting as Transfer Agent and for providing fund accounting
services to the Eureka Funds.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL FROM THE EUREKA
FROM THE EUREKA AS PART OF FUND BENEFITS UPON FUNDS PAID TO
NAME OF PERSON, POSITION FUNDS(1) EXPENSES RETIREMENT DIRECTORS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter F. Beran, Trustee $3,000 none none $3,000
- --------------------------------------------------------------------------------------------------------------------------
David L. Buell, Trustee $3,000 none none $3,000
- --------------------------------------------------------------------------------------------------------------------------
Masaki Horioka, Trustee $3,000 none none $3,000
- --------------------------------------------------------------------------------------------------------------------------
Larry Layne, Trustee 0 none none 0
- --------------------------------------------------------------------------------------------------------------------------
Donald H. Livingstone, Trustee 0 none none 0
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISER
Investment advisory and management services are provided to each Fund
by SBCL pursuant to an Investment Advisory Agreement ("Advisory Agreement")
dated October 31, 1997.
The Advisory Agreement provides that SBCL shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Eureka
Funds in connection with the performance of such Advisory Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of SBCL in the performance of its
duties, or from reckless disregard by SBCL of its duties and obligations
thereunder.
The Advisory Agreement will continue in effect until October 31,
1999 as to each of the Funds and from year to year if such continuance is
approved at least annually by the Eureka Funds' Board of Trustees or by vote of
the holders of a majority of the outstanding Shares of that Fund (as defined
under "GENERAL INFORMATION - Miscellaneous"). The Advisory Agreement is
terminable as to a particular Fund at any time upon 60 days written notice
without penalty by the Trustees, by vote of the holders of a majority of the
outstanding Shares of that Fund, or by SBCL. The Advisory Agreement also
terminates automatically in the event of any assignment, as defined in the 1940
Act.
B-29
<PAGE> 92
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, SBCL determines, subject to the
general supervision of the Board of Trustees and in accordance with each Fund's
investment objective and restrictions, which securities are to be purchased and
sold by a Fund, and which brokers are to be eligible to execute portfolio
transactions. Purchases and sales of portfolio securities with respect to the
Funds usually are principal transactions in which portfolio securities are
purchased directly from the issuer or from an underwriter or market maker
for the securities. Purchases from underwriters of portfolio securities
generally include (but not in the case of mutual fund shares purchased by the
Funds) a commission or concession paid by the issuer to the underwriter and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Eureka Funds, where possible, will deal directly
with dealers who make a market in the securities involved unless better price
and execution are available elsewhere. While SBCL generally seeks competitive
spreads or commissions, the Eureka Funds may not necessarily pay the lowest
spread or commission available on each transaction, for reasons discussed
below.
Allocation of transactions, including their frequency, to various
dealers is determined by SBCL in its best judgment and in a manner deemed fair
and reasonable to Shareholders. The major consideration in allocating brokerage
business is the assurance that the best execution is being received on all
transactions. Brokerage will at times be allocated to firms that supply
research, statistical data and similar services when the terms of the
transaction and the capabilities of different broker/dealers are consistent
with the guidelines set forth in Section 28(e) of the Securities Exchange Act
of 1934. Information so received is in addition to, and not in lieu of,
services required to be performed by SBCL and does not reduce the advisory fees
payable to SBCL. Such information may be useful to SBCL in serving both the
Eureka Funds and other clients and, conversely, supplemental information
obtained by the placement of business of other clients may be useful to SBCL
in carrying out its obligations to the Eureka Funds.
Except as otherwise disclosed to the Shareholders of the Funds and as
permitted by applicable rules and regulations, SBCL will not execute portfolio
transactions on behalf of the Funds through, acquire portfolio securities issued
by, make savings deposits in, or enter into repurchase or reverse repurchase
agreements with SBCL, BISYS Fund Services, or their affiliates, and will not
give preference to SBCL's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements, and reverse repurchase
agreements.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by SBCL.
Other investment companies or accounts may also invest in the same securities
as the Eureka Funds. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and
B-30
<PAGE> 93
another Fund of the Eureka Funds, investment company or account, the
transaction will be averaged as to price and available investments will be
allocated as to amount in a manner which SBCL believes to be equitable to the
Fund(s) and such other investment company or account. In some instances, this
investment procedure may adversely affect the price paid or received by a Fund
or the size of the position obtained by a Fund. To the extent permitted by law,
SBCL may aggregate the securities to be sold or purchased for a Fund with those
to be sold or purchased for the other Funds or for other investment companies
or accounts in order to obtain best execution. As provided by the Advisory
Agreement, in making investment recommendations for the Eureka Funds, SBCL will
not inquire or take into consideration whether an issuer of securities proposed
for purchase or sale by the Eureka Funds is a customer of SBCL or their
parents, subsidiaries, or affiliates, and, in dealing with their customers,
SBCL and their parents, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by the Eureka
Funds.
In determining when and to what extent to use Sanwa Securities (USA)
Company LP, Sanwa Futures LLC or any other affiliated broker-dealer as its
broker for executing orders for the Funds on securities exchanges, SBCL will
consider (if relevant) whether the compensation to be paid Sanwa Securities
(USA) Company LP, Sanwa Futures LLC or any other affiliated broker-dealer will
be (i) fair and reasonable, (ii) at least as favorable to the Funds as
commissions that would be charged by other qualified brokers having comparable
execution capabilities and (iii) at least as favorable as commissions
contemporaneously charged by Sanwa Securities (USA) Company LP, Sanwa Futures
LLC or any other affiliated broker-dealer on comparable transactions for its
most favored unaffiliated customers. The Funds do not consider it practicable
or in the best interests of their shareholders to solicit competitive bids for
commission rates on each transaction. However, the Board of Trustees, including
a majority of the Trustees who are not "interested persons" of Sanwa Securities
(USA) Company LP, Sanwa Futures LLC or any other affiliated broker-dealer
within the meaning of the 1940 Act, (i) has prescribed procedures designed to
provide that the Funds do not pay commissions that do not meet the standards
described above, (ii) reviews those procedures annually to determine whether
they remain adequate and (iii) considers quarterly whether or not the
commissions charged by Sanwa Securities (USA) Company LP, Sanwa Futures LLC or
any other affiliated broker-dealer have met the standards.
Brokerage services Sanwa Securities (USA) Company LP or Sanwa Futures
LLC provides to the Funds are also subject to Rule 11a2-2(T) under the
Securities Exchange Act of 1934, as amended. Rule 11a2-2(T) permits the Funds to
use Sanwa Securities (USA) Company LP or Sanwa Futures LLC as a broker provided
certain conditions are met. Among these requirements are that members of the
exchange not associated with Sanwa Securities (USA) Company LP or Sanwa Futures
LLC perform the floor brokerage element of portfolio transactions (that is,
execution on the exchange floor or through use of exchange facilities) that the
orders to such members be transmitted from off the exchange floor and that
neither Sanwa Securities (USA) Company LP, Sanwa Futures LLC nor an associated
person of Sanwa Securities (USA) Company LP or Sanwa Futures LLC participates
in the execution of the transaction after the order has been so transmitted. In
connection with transactions in which Sanwa Securities (USA) Company LP or
Sanwa Futures LLC acts as broker for the Funds, Sanwa Securities (USA) Company
LP or Sanwa Futures LLC, while not permitted to perform floor brokerage (which
is undertaken by members Sanwa Securities (USA) Company LP or Sanwa Futures
LLC selects who are not associated with that firm), still continues to bear
principal responsibility for determining important elements of overall
execution such as timing and order size, and also clears and settles such
transactions. Sanwa Securities (USA) Company LP or Sanwa Futures LLC pays the
fees charged by those persons performing the described floor brokerage
elements. Sanwa Securities (USA) Company LP or Sanwa Futures LLC will not trade
directly with the Funds in any transactions in which Sanwa Securities (USA)
Company LP or Sanwa Futures LLC or an affiliate acts as principal.
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in INVESTMENT COMPANY
INSTITUTE V. CAMP that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a bank from operating a mutual fund for the
collective investment of managing agency accounts. Subsequently, the Board of
Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V.
INVESTMENT COMPANY INSTITUTE that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the BOARD
OF GOVERNORS case, the Supreme Court also stated that if a bank complied with
the restrictions imposed by the Board in its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to investment companies, a bank performing investment
advisory services for an investment company would not violate the Glass-Steagall
Act.
SBCL believes that they possess the legal authority to perform the
services for each Fund contemplated by the Advisory Agreement and described in
the Prospectuses and this Statement of Additional Information and has so
represented in the Advisory Agreement. Future changes in either federal or state
statutes and regulations relating to the permissible activities of banks or bank
holding companies and the subsidiaries or affiliates of those entities, as well
as further judicial or administrative decisions or interpretations of present
and future statutes and regulations, could prevent or restrict SBCL from
continuing to perform
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<PAGE> 94
such services for the Eureka Funds. Depending upon the nature of any changes in
the services which could be provided by SBCL, the Board of Trustees would
review the Eureka Funds' relationship with SBCL and consider taking all action
necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of SBCL or their affiliated and
correspondent banks (the "Banks") in connection with Customer's purchases of
Shares of the Eureka Funds, the Banks might be required to alter materially or
discontinue the services offered by them to Customers. It is not anticipated,
however, that any change in the Eureka Funds' method of operations would
affect its net asset value per Share or result in financial losses to any
Customer.
ADMINISTRATOR
BISYS serves as administrator (the "Administrator") to each Fund
pursuant to the Management and Administration Agreement dated as of
October 21, 1997 (the "Administration Agreement"). The Administrator
assists in supervising operations of each Fund (other than those performed by
SBCL under the Advisory Agreement, those performed by The Bank of New York
under its custodial services agreements with the Eureka Funds, and those
performed by BISYS Fund Services, Inc. under its transfer agency and
shareholder service and fund accounting agreements with the Eureka Funds). The
Administrator is a broker-dealer registered with the Securities and Exchange
Commission, and is a member of the National Association of Securities Dealers,
Inc. The Administrator provides financial services to institutional clients.
Under the Administration Agreement, the Administrator has agreed to
monitor the net asset value of the money market funds, to maintain office
facilities for the Eureka Funds, to maintain the Eureka Funds' financial
accounts and records, and to furnish the group statistical and research data
and certain bookkeeping services, and certain other services required by the
Eureka Funds. The Administrator prepares annual and semi-annual reports to the
Securities and Exchange Commission, prepares federal and state tax returns,
prepares filings with state securities commissions, and generally assists in
supervising all aspects of the Eureka Funds' operations (other than those
performed by SBCL under the Advisory Agreement, and those performed by
The Bank of New York, under its custodial services agreements with the Eureka
Funds, and those performed by BISYS under its transfer agency and shareholder
service and fund accounting agreements with the Eureka Funds). Under the
Administration Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
Under the Administration Agreement, the Administrator receives a fee
from each Fund equal to the lesser of (a) a fee computed at the annual rate of
twenty one-hundredths of one percent (.20%) of such Fund's average daily net
assets or (b) such fee as may from time to time be agreed upon in writing by
the Eureka Funds and the Administrator. A fee agreed to in writing from time to
time by the Eureka Funds and the Administrator may be significantly lower than
the fee calculated at the annual rate and the effect of such lower fee would be
to lower a
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Fund's expenses and increase the net income of the Fund during the period when
such lower fee is in effect.
The Administration Agreement will continue until October 31, 1999.
Thereafter, the Administration Agreement shall be renewed automatically for
successive two year terms, unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term. The Administration Agreement is terminable with
respect to a particular Fund only upon mutual agreement of the parties to the
Administration Agreement and for cause (as defined in the Administration
Agreement) by the party alleging cause, on not less than 60 days notice by the
Group's Board of Trustees or by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Eureka Funds in connection with the
matters to which the Administration Agreement relates, except a loss resulting
from willful misfeasance, bad faith, or gross negligence in the performance of
its duties, or from the reckless disregard by the Administrator of its
obligations and duties thereunder.
DISTRIBUTOR
BISYS serves as distributor to each Fund pursuant to a Distribution
Agreement dated October 21, 1997 (the "Distribution Agreement"). The
Distribution Agreement will continue in effect for one-year periods if such
continuance is approved at least annually (i) by the Board of Trustees or by
the vote of a majority of the outstanding Shares of the Funds or Fund subject
to such Distribution Agreement, and (ii) by the vote of a majority of the
Trustees who are not parties to such Distribution Agreement or interested
persons (as defined in the 1940 Act) of any party to such Distribution
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated in the event of any
assignment, as defined in the 1940 Act.
For its services as Distributor, BISYS is entitled to a fee of 0.25%
of the average daily net assets of Class A Shares of each Fund payable under the
Fund's Distribution Plan.
The Distribution Plan was initially approved on October 21, 1997
by the Board of Trustees, including a majority of the trustees who are
not interested persons of the Fund (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan (the "Independent
Trustees"). The Distribution Plan provides for fees only upon the Class A Shares
of each Fund.
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
may be terminated with respect to any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Class A
Shares of that Fund. The Distribution Plan
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may be amended by vote of the Board of Trustees, including a majority of the
Independent Trustees, cast in person at a meeting called for such purpose,
except that any change in the Distribution Plan that would materially increase
the distribution fee with respect to a Fund requires the approval of the
holders of that Fund's Class A Shares. The Board of Trustees will review on a
quarterly and annual basis written reports of the amounts received and expended
under the Distribution Plan (including amounts expended by the Distributor to
Participating Organizations pursuant to the Servicing Agreements entered into
under the Distribution Plan) indicating the purposes for which such
expenditures were made.
CUSTODIAN
The Bank of New York serves as the Eureka Funds' Custodian.
TRANSFER AGENT AND FUND ACCOUNTING SERVICES
BISYS serves as transfer agent to each Fund pursuant to a Transfer
Agency Agreement.
BISYS also provides fund accounting services to each of the Funds
pursuant to a Fund Accounting Agreement with the Eureka Funds. Under the Fund
Accounting Agreement, BISYS receives a fee from each Fund at the annual rate of
.03% of such Fund's average daily net assets, subject to a minimum annual fee.
INDEPENDENT AUDITORS
Ernst & Young LLP has been selected as independent auditors. Ernst &
Young LLP's address is 10 West Broad Street, Columbus, Ohio 43215.
LEGAL COUNSEL
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005 serve as counsel to the Eureka Funds.
PERFORMANCE INFORMATION
YIELDS OF THE MONEY MARKET FUNDS
As summarized in the Fund's Prospectuses under the heading "Performance
Information," the "yield" of each Money Market Fund for a seven-day period (a
"base period") will be computed by determining the "net change in value"
(calculated as set forth below) of a hypothetical account having a balance of
one share at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7
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with the resulting yield figure carried to the nearest hundredth of one percent.
Net changes in value of a hypothetical account will include the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares, but will not
include realized gains or losses or unrealized appreciation or depreciation on
portfolio investments. Yield may also be calculated on a compound basis (the
"effective yield") which assumes that net income is reinvested in Fund shares at
the same rate as net income is earned for the base period.
The yield and effective yield of each Money Market Fund will vary in
response to fluctuations in interest rates and in the expenses of each Fund. For
comparative purposes the current and effective yields should be compared to
current and effective yields offered by competing financial institutions for
that base period only and calculated by the methods described above.
YIELDS OF THE VARIABLE NAV FUNDS
As summarized in the Prospectuses under the heading "Performance
Information," yields of the Variable NAV Funds will be computed by annualizing
net investment income per share for a recent 30-day period and dividing that
amount by the maximum offering price per share (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last trading day of
that period, according to the following formula:
a-b
30-Day Yield = 2[( ----- +1)(6)-1]
cd
In the above formula, "a" represents dividends and interest earned by a
particular class during the 30-day base period; "b" represents expenses accrued
to a particular class for the 30-day base period (net of reimbursements); "c"
represents the average daily number of shares of a particular class outstanding
during the 30-day base period that were entitled to receive dividends; and "d"
represents the maximum offering price per share of a particular class on the
last day of the 30-day base period.
Net investment income will reflect amortization of any market value
premium or discount of fixed income securities (except for obligations backed by
mortgages or other assets) and may include recognition of a pro rata portion of
the stated dividend rate of dividend paying portfolio securities. The yield of
each of the Variable NAV Funds will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Group allocated to each Fund. These factors and possible differences in the
methods used in calculating yield should be considered when comparing a Fund's
yield to yields published for other investment companies and other investment
vehicles. Yield should also be considered relative to changes in the value of
the Fund's shares and to the relative risks associated with the investment
objectives and policies of each Fund.
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Investors in the Variable NAV Funds are specifically advised that share
prices, expressed as the net asset values per share, will vary just as yields
will vary.
CALCULATION OF TOTAL RETURN
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and annualizing the
result for periods of less than one year.
At any time in the future, yields and total return may be higher or
lower than past yields, there can be no assurance that any historical results
will continue.
PERFORMANCE COMPARISONS
YIELD AND TOTAL RETURN. From time to time, performance information for
the Funds showing their average annual total return and/or yield may be included
in advertisements or in information furnished to present or prospective
shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may from time to time be included in
advertisements.
From time to time, the Eureka Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (2) discussions of general economic trends; (3)
presentations of statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Eureka Funds, (5) descriptions of investment strategies for
one or more of such Funds; (6) descriptions or comparisons of various savings
and investment products (including, but not limited to, insured bank products,
annuities, qualified retirement plans and individual stocks and bonds), which
may or may not include the Funds; (7) comparisons of investment products
(including the Funds) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in one or more of the Funds. The Funds may also
include in these communications calculations, such as
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hypothetical compounding examples, that describe hypothetical investment
results, such performance examples will be based on an express set of
assumptions and are not indicative of performance of any of the Funds.
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the NYSE, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40 financial
services concerns. The S&P 500 represents about 80% of the market value of all
issues traded on the NYSE.
The Morgan Stanley Capital International Europe, Australia and the Far
East Index ("EAFE") is an index composed of a sample of companies representative
of the market structure of twenty European and Pacific Basin countries. The
Index represents the evolution of an unmanaged portfolio consisting of all
domestically listed stocks.
The Lehman Aggregate Bond Index ("Aggregate Bond Index") is a measure
of the market value of all public obligations of the U.S. Treasury; all publicly
issued debt of all agencies of the U.S. government; all quasi-federal
corporations; all corporate debt guaranteed by the U.S. government; and mortgage
backed securities. Corporate issues must have amounts outstanding in excess of
$1 million, have at least one year to maturity and be rated investment grade by
a NRSRO. Flower bonds and foreign targeted issues are also included in the
Aggregate Bond Index.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield or
performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by SBCL or
its affiliated or correspondent banks for cash management services will reduce a
Fund's effective yield to Customers.
ADDITIONAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES
The Eureka Funds organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated April 7, 1997, under the name "Sanwa
Fund." A copy of the Eureka Funds' Amended and Restated Agreement and
Declaration of Trust, (the "Declaration of Trust") is on file with the
Secretary of State of The Commonwealth of Massachusetts. The
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Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest. The Eureka Funds
presently have five series of Shares offered to the public. The Declaration of
Trust authorizes the Board of Trustees to divide or redivide any unissued
Shares into one or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Eureka
Funds, Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
As described in the text of the Prospectuses following the caption
"GENERAL INFORMATION -- Description of the Eureka Funds and its Shares," shares
of the Group are entitled to one vote per share (with proportional voting for
fractional shares) on such matters as shareholders are entitled to vote.
Shareholders vote in the aggregate and not by series or class on all matters
except (i) when required by the 1940 Act, shares shall be voted by individual
series, (ii) when the Trustees have determined that the matter affects only the
interests of a particular series or class, then only Shareholders of such
series or class shall be entitled to vote thereon, and (iii) only the holders
of Class A Shares will be entitled to vote on matters submitted to Shareholder
vote with regard to the Distribution Plan applicable to Class A. There will
normally be no meetings of Shareholders for the purposes of electing Trustees
unless and until such time as less than a majority of the Trustees have been
elected by the Shareholders, at which time the Trustees then in office will
call a Shareholders' meeting for the election of Trustees. In addition,
Trustees may be removed from office by a written consent signed by the holders
of two-thirds of the outstanding shares of the Eureka Funds and filed with the
Eureka Funds' custodian or by vote of the holders of two-thirds of the
outstanding shares of the Eureka Funds at a meeting duly called for the
purpose, which meeting shall be held upon the written request of the holders of
not less than 10% of the outstanding shares of any Fund. Except as set forth
above, the Trustees shall continue to hold office and may appoint their
successors.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Eureka
Funds. However, the Eureka Funds Declaration of Trust disclaims Shareholder
liability for acts or obligations of the Eureka Funds and requires that notice
of such disclaimer be given in every agreement, obligation or instrument
entered into or executed by the Eureka Funds or the Trustees. The Declaration
of Trust provides for indemnification out of a Fund's property for all loss and
expense of any Shareholder of such Fund held liable on account of being or
having been a Shareholder. Thus, the risk of a Shareholder incurring
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financial loss on account of Shareholder liability is limited to circumstances
in which a Fund would be unable to meet its obligations.
The Agreement and Declaration of Trust states further that no Trustee,
officer or agent of the Eureka Funds shall be personally liable in connection
with the administration or preservation of the assets of the Eureka Funds or
the conduct of the Eureka Funds' business; nor shall any Trustee, officer, or
agent be personally liable to any person for any action or failure to act
except for his own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties. The Agreement and Declaration of Trust also
provides that all persons having any claim against the Trustees or the Eureka
Funds shall look solely to the assets of the Eureka Funds for payment.
MISCELLANEOUS
The Eureka Funds may include information in its Annual Reports and
Semi-Annual Reports to Shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for
one or more of the Funds within the Eureka Funds, or (4) describes investment
management strategies for such Funds. Such information is provided to inform
Shareholders of the activities of the Eureka Funds for the most recent fiscal
year or half-year and to provide the views of the SBCL and/or Eureka Funds
officers regarding expected trends and strategies.
The organizational expenses of the Eureka Funds have been allocated
to each Fund and are being amortized over a period of five years from the
commencement of the public offering of Shares of the Eureka Funds. In the event
any of the initial Shares of the Eureka Funds are redeemed during the
amortization period by any holder thereof, the redemption proceeds will be
reduced by a pro rata portion of any unamortized organization expenses in the
same proportion as the number of initial Shares being redeemed bears to the
total number of initial Shares outstanding at the time of redemption. Investors
purchasing Shares of the Eureka Funds subsequent to the date of the
Prospectuses and this Statement of Additional Information bear such expenses
only as they are amortized against a Fund's investment income.
The Eureka Funds are registered with the Securities and Exchange
Commission as a management investment company. Such registration does not
involve supervision by the Securities and Exchange Commission of the management
or policies of the Eureka Funds.
As of October 1, 1997, BISYS, 3435 Stelzer Road, Columbus, Ohio 43219,
directly or beneficially owned 100% of each Fund.
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
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The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
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APPENDIX
The NRSROs utilized by SBCL include Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Duff & Phelps Credit Rating Co. ("Duff"),
Fitch Investors Service, Inc. ("Fitch"), IBCA Limited and its affiliate, IBCA
Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc. ("Thomson"). Set forth
below is a description of the relevant ratings of each such NRSRO.
LONG-TERM DEBT RATINGS (may be assigned, for example, to corporate and municipal
bonds)
Description of the five highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
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.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded
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during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.
Description of the five highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA Debt rated AA differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A Debt rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB Debt rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
BB Debt rated BB is regarded as having significant speculative
characteristics although it is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the
obligation.
Description of the three highest long-term debt ratings by Duff:
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.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
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Description of the three highest long-term debt ratings by Fitch (plus (+) or
minus (-) signs are used with a rating symbol to indicate the relative position
of the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues 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.
IBCA's description of its three highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial, such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment
risk, albeit not very significantly.
A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
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SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have
a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often
be evidenced by many of the following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structure with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of
fixed financial charges and high internal
cash generation.
- Well-established access to a range of
financial markets and assured sources of
alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have
a strong ability for repayment of senior short-term
debt 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, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate
liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection
measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 Highest category. The obligor's capacity to meet its financial
commitments is strong. Within this category, certain
obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial
commitments is extremely strong.
A-2 Obligations assigned this rating are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than obligations in
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higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is
satisfactory.
A-3 Obligations assigned this rating exhibit adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.
Duff's description of its five highest short-term debt ratings. Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating category:
D-1+ 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.
D-1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are
larger and subject to more variation.
Nevertheless, timely payment is expected.
Fitch's description of its four highest short-term debt ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+
or F-1 ratings.
B-45
<PAGE> 108
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment
grade.
IBCA's description of its three highest short-term debt ratings:
A1 Obligations supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit
feature, a rating of A1+ is assigned.
A2 Obligations supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS
Moody's description of its two highest short-term loan/municipal note ratings:
MIG 1/VMIG 1 This designation denotes best quality. There is
present strong protection by established cash flows,
superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.
S&P's description of its two highest municipal note ratings:
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse financial and economic
changes over the term of the notes.
SHORT-TERM DEBT RATINGS
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
The TBW Short-Term Debt Ratings apply only to specific debt instruments with
original maturities of one year or less. TBW ratings represent an assessment of
the likelihood of an untimely payment of principal and interest. Important
factors that may influence this assessment are the overall financial health of
the particular company, and the probability that
B-46
<PAGE> 109
the government will come to the aid of a troubled institution in order to avoid
a default or failure.
The TBW Short-Term Ratings represent an assessment of the likelihood of an
untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high likelihood
that principal and interest will be paid on a timely
basis.
TBW-2 The second-highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated "TBW-1."
TBW-3 The lowest investment-grade category; indicates that while
the obligation is more susceptible to adverse developments
(both internal and external) than those with higher
ratings, the capacity to service principal and interest in
a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
B-47
<PAGE> 110
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder
Eureka Funds:
We have audited the accompanying statement of assets and liabilities of the
Eureka Funds (comprised of the Prime Money Market Fund, the U.S. Treasury
Obligations Fund, the Investment Grade Bond Fund, the Global Asset Allocation
Fund, and the Equity Fund) (the Fund) as of September 26, 1997. This statement
of assets and liabilities is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of each of the
portfolios comprising the Eureka Funds at September 26, 1997, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Columbus, Ohio
September 30, 1997
B-48
<PAGE> 111
EUREKA FUNDS
Eureka Prime Money Market Fund
Statement of Assets and Liabilities
September 26, 1997
<TABLE>
<S> <C>
ASSETS:
Cash $20,000
Deferred organization expenses 25,000
=======
Total Assets 45,000
LIABILITIES:
Accrued organization expenses 25,000
-------
NET ASSETS: $20,000
=======
NET ASSETS CONSIST OF:
Capital - 20,000 shares of beneficial
interest ("shares") issued and outstanding;
unlimited shares authorized - Trust Shares $20,000
=======
NET ASSET VALUE:
Trust Shares ($20,000/20,000 shares outstanding) -
offering and redemption price per share $ 1.00
=======
</TABLE>
See notes to financial statements.
B-49
<PAGE> 112
EUREKA FUNDS
Eureka U.S. Treasury Obligations Fund
Statement of Assets and Liabilities
September 26, 1997
<TABLE>
<S> <C>
ASSETS:
Cash $20,000
Deferred organization expenses 25,000
-------
Total Assets 45,000
LIABILITIES:
Accrued organization expenses 25,000
-------
NET ASSETS: $20,000
=======
NET ASSETS CONSIST OF:
Capital - 20,000 shares of beneficial interest ("shares")
issued and outstanding; unlimited shares
authorized - Trust Shares $20,000
=======
NET ASSET VALUE:
Trust Shares ($20,000/20,000 shares outstanding) -
offering and redemption price per share $ 1.00
=======
</TABLE>
See notes to financial statements.
B-50
<PAGE> 113
EUREKA FUNDS
Eureka Investment Grade Bond Fund
Statement of Assets and Liabilities
September 26, 1997
<TABLE>
<S> <C>
ASSETS:
Cash $20,000
Deferred organization expenses 25,000
-------
Total Assets 45,000
LIABILITIES:
Accrued organization expenses 25,000
-------
NET ASSETS: $20,000
=======
NET ASSETS CONSIST OF:
Capital - 2,000 shares of beneficial
interest ("shares") issued and outstanding;
unlimited shares authorized - Trust Shares $20,000
=======
NET ASSET VALUE:
Trust Shares ($20,000/2,000 shares outstanding)
- offering and redemption price per share $ 10.00
=======
</TABLE>
See notes to financial statements.
B-51
<PAGE> 114
EUREKA FUNDS
Eureka Global Asset Allocation Fund
Statement of Assets and Liabilities
September 26, 1997
<TABLE>
<S> <C>
ASSETS:
Cash $20,000
Deferred organization expenses 25,000
-------
Total Assets 45,000
LIABILITIES:
Accrued organization expenses 25,000
-------
NET ASSETS: $20,000
=======
NET ASSETS CONSIST OF:
Capital - 2,000 shares of beneficial
interest ("shares") issued and outstanding;
unlimited shares authorized - Trust Shares $20,000
=======
NET ASSET VALUE:
Trust Shares ($20,000/2,000 shares outstanding) -
offering and redemption price per share $ 10.00
=======
</TABLE>
See notes to financial statements.
B-52
<PAGE> 115
EUREKA FUNDS
Eureka Equity Fund
Statement of Assets and Liabilities
September 26, 1997
<TABLE>
<S> <C>
ASSETS:
Cash $20,000
Deferred organization expenses 25,000
-------
Total Assets 45,000
LIABILITIES:
Accrued organization expenses 25,000
-------
NET ASSETS: $20,000
=======
NET ASSETS CONSIST OF:
Capital - 2,000 shares of beneficial interest ("shares")
issued and outstanding; unlimited shares
authorized - Trust Shares $20,000
=======
NET ASSET VALUE:
Trust Shares ($20,000/2,000 shares outstanding) -
offering and redemption price per share $ 10.00
=======
</TABLE>
See notes to financial statements.
B-53
<PAGE> 116
EUREKA FUNDS
NOTES TO FINANCIAL STATEMENTS
September 26, 1997
1. ORGANIZATION
The Eureka Funds (the "Group") was organized as a Massachusetts business
trust named Sanwa Fund on April 7, 1997. The Group is a diversified
open-end management investment company registered under the Investment
Company Act of 1940 (the "1940 Act"). There are an unlimited number of
authorized units of beneficial interest ("shares") of the Group which may
be divided into an unlimited number of series of shares, and which are
presently divided into five series: Eureka Prime Money Market Fund, Eureka
U.S. Treasury Obligations Fund, Eureka Investment Grade Bond Fund, Eureka
Global Asset Allocation Fund and Eureka Equity Fund (each a "Fund", and
collectively, the "Funds"). Each Fund offers two classes of shares with a
par value of $0.00001: Trust Shares and Class A Shares. Each share
represents an equal proportionate interest in a Fund with other shares of
the same series and class, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that
Fund. Trust Shares of the Funds are offered to Sanwa Bank California and
its affiliates and other financial service providers approved by the
Distributor for the investment of funds for which they act in a fiduciary,
advisory, agency, custodial (other than for individual retirement
accounts), or similar capacity. Class A Shares are offered to the general
public. Each class of shares is substantially the same, except that Class A
Shares bear the fees that are payable under the Group's Distribution and
Shareholder Services Plan (the "Distribution Plan") which relates only to
the Class A Shares.
The Funds have had no operations other than those actions relating to
organizational matters. As of September 26, 1997, only Trust shares have
been issued and all outstanding shares of the Funds are owned by BISYS Fund
Services, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION EXPENSES: All costs incurred by the Group in connection with
the organization of the Funds and the initial public offering of shares of
the Funds, principally professional fees and printing, have been deferred.
Upon commencement of investment operations of each Fund, the deferred
organization expenses will be amortized on a straight-line basis over a
period of five years. In the event that any of the initial shares of the
Funds are redeemed during the amortization period by any holder thereof,
B-54
<PAGE> 117
the redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of said shares being redeemed
bears to the number of initial shares that are outstanding at the time of
the redemption.
FEDERAL INCOME TAXES: Each of the Funds 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
taxable income to its shareholders which will be sufficient to relieve it
from all or substantially all federal income taxes.
3. RELATED PARTY TRANSACTIONS
Sanwa Bank California ("SBCL"), will serve as the investment adviser of
each Fund. SBCL is a wholly-owned subsidiary of The Sanwa Bank Limited, of
Japan. Under the terms of an investment advisory agreement between the
Group and SBCL, SBCL will be entitled to receive fees based on a percentage
of the average net assets of each Fund. SBCL has agreed to voluntarily
reduce the amount of its investment advisory fee through the end of the
Funds' initial fiscal year.
BISYS Fund Services, Inc. ("BISYS"), a wholly-owned subsidiary of The BISYS
Group, Inc., will serve as the administrator for each Fund and will also
act as the Group's principal underwriter and distributor. BISYS will also
serve as transfer agent for and provide fund accounting services to the
Group.
Under the Distribution Plan, a Fund will pay a monthly distribution fee to
BISYS as compensation for its services in connection with the Distribution
Plan at an annual rate equal to 0.25% of the average daily net assets of
Class A Shares of each Fund.
Certain officers of the Group are affiliated with BISYS. Such persons are
not paid directly by the Group for serving in those capacities.
B-55
<PAGE> 118
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Incorporated by reference to the Eureka Funds Statement of
Additional Information filed herewith are for each Eureka Fund:
-- Statement of Assets & Liabilities as of September 26,
1997 (audited).
-- Notes to Financial Statements (audited).
(b) Exhibits:
(1) Declaration of Trust, dated April 7, 1997, is
incorporated by reference from Exhibit (1) to
Registrant's initial Registration Statement on Form
N-1A filed electronically on July 31, 1997.
(2) Form of By-Laws is incorporated by reference from
Exhibit (2) to Registrant's initial Registration
Statement on Form N-1A filed electronically on
July 31, 1997.
(3) Not applicable.
(4) (a) Article III, Sections 4 and 5; Article IV, Section
1; Article V; Article VIII, Section 4; and Article
IX, Sections 1, 4, and 7 of the Declaration of
Trust referred to herein as Exhibit (1).
(b) Article 9; Article 10, Section 6; and Article 11
of the By-Laws referred to herein as Exhibit 2.
(5) Form of Investment Advisory Agreement between
Registrant and Sanwa Bank California is filed herewith.
(6) Form of Distribution Agreement.
(7) Not applicable.
(8) (a) Form of Custody Agreement between Registrant and
The Bank of New York is filed herewith.
(b) Form of Foreign Custody Manager Agreement between
Registrant and The Bank of New York is filed
herewith.
(9) (a) Form of Transfer Agency Agreement between
Registrant and BISYS Fund Services, Inc. is filed
herewith.
(b) Form of Fund Accounting Agreement between
Registrant and BISYS Fund Services, Inc. is filed
herewith.
(c) Form of Administration Agreement between
Registrant and BISYS Fund Services Limited
Partnership filed is filed herewith.
(d) Form of Service Plan.
(e) Forms of service agreements pursuant to Service
Plan referred to herein as Exhibit (9)(d) is filed
herewith.
(10) Opinion and Consent of Counsel as to legality of shares
being registered is filed herewith.
(11) (a) Consent of Ropes & Gray, is filed herewith.
(b) Consent of Ernst & Young LLP, is filed herewith.
(12) Not applicable.
(13) Form of Purchase Agreement is filed herewith.
(14) Not applicable.
(15) (a) Form of Distribution and Shareholder Services Plan
is filed herewith.
(b) Forms of Servicing Agreement pursuant to
Distribution and Shareholder Services Plan referred
to herein as Exhibit 15(a) is filed herewith.
(16) Not applicable.
(17) Not applicable.
(18) Form of Multiple Class Plan is filed herewith.
<PAGE> 119
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
As of the date of this Registration Statement, there are no persons
controlled by or under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of the date of this Registration Statement, there was one (1)
holder of record of shares of beneficial interest of the Registrant.
ITEM 27. INDEMNIFICATION
Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust (Exhibit (1) hereto, which is incorporated herein
by reference) provides in effect that Registrant will indemnify its
officers and trustees against all liabilities and expenses, including
but not limited to amounts paid in satisfaction of judgments, in
compromise, or as fines and penalties, and counsel fees reasonably
incurred by any such officer or trustee in connection with the defense
or disposition of any action, suit, or other proceeding. However, in
accordance with Section 17(h) and 17(i) of the 1940 Act and its own
terms, said Agreement and Declaration of Trust does not protect any
person against any liability to Registrant or its shareholders to
which he or she would otherwise be subject by reason of willfull
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. In any event,
Registrant will comply with 1940 Act Releases Nos. 7221 and 11330
respecting the permissible boundaries of indemnification by an
investment company of its officers and trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to
trustees, officers and controlling persons of the Registrant pursuant
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 1933 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
2
<PAGE> 120
Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the 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 1933 Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Sanwa Bank California ("SBCL"), performs investment advisory services
for Registrant. SBCL is a wholly owned subsidiary of The Sanwa Bank
Limited, of Japan. Its principal offices are located at 601 South
Figueroa Street, Los Angeles, California 90017. Established in 1972,
SBCL provides a full range of personal and business banking services
through a network of more than 100 branches and offices statewide. SBCL
has approximately $1.45 billion of assets under management.
To the knowledge of Registrant, none of the directors or officers of
SBCL, except those set forth below, is or has been at any time during
the past two fiscal years engaged in any other business, profession,
vocation or employment of a substantial nature, except the certain
directors and officers of SBCL also hold positions with The Sanwa Bank
Limited, of Japan or its other subsidiaries.
Listed below are the directors and certain principal executive officers
of SBCL, their principal occupations and, for the prior two fiscal
years, any other business, profession, vocation, or employment of a
substantial nature engaged in by such directors and officers:
<TABLE>
<CAPTION>
NAME AND POSITION OTHER BUSINESS, PROFESSION, VOCATION, OR EMPLOYMENT
- ----------------- ---------------------------------------------------
<S> <C>
Teruyoshi Yasufuku Chairman of the Board, SBCL; Counselor, Sanwa Research Institute
Steven D. Broidy Director, SBCL; Vice Chairman and Chief Administrative Officer, City National Bank
Robert C. Cooke Director, SBCL
Robert C. Corteway Director, SBCL
Vilma Martinez Director, SBCL; Litigation Partner, Munger, Tolles & Olson
James M. Rosser, Ph.D. Director, SBCL; President, California State University at Los Angeles
</TABLE>
3
<PAGE> 121
Cynthia Ann Telles, Ph.D. Director, SBCL; Director, Spanish Speaking
Psychosocial Clinic, The Neuropsychiatric
Institute and Hospital Department of
Psychiatry and Behavioral Sciences, UCLA
School of Medicine
James C. Van Horne Director, SBCL; A.P. Gianniani Professor of
Finance at the Graduate School of Business
at Stanford University
Tamio Takakura President and Chief Executive Officer, SBCL
Kazuyoshi Kuwahata Vice Chairman & Chief Line Officer, SBCL
Howard N. Gould Vice Chairman & Chief Administrative Officer;
SBCL
ITEM 29. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services acts as distributor and administrator for the
Registrant. BISYS Fund Services also distributes the securities of
American Performance Funds, AmSouth Mutual Funds, The ARCH Fund, Inc.,
BB&T Mutual Funds Groups, The Coventry Group, Empire Builder Tax Free
Bond Fund, First Choice Funds Trust, Fountain Square Funds, Hirtle
Callaghan Trust, HSBC Family of Funds, The Infinity Mutual Funds, Inc.,
Intrust Funds, The Kent Funds, Magna Funds, MarketWatch Funds, Meyers
Sheppard Investment Trust, Minerva Funds, MMA Praxis Mutual Funds, The
M.S.D. & T. Funds, Inc., Pacific Capital Funds, The Parkstone Group of
Funds, The Parkstone Advantage Funds, Pegasus Funds, Qualivest Funds,
The Republic Funds Trust, The Republic Advisors Funds Trust, The
Riverfront Funds, Inc., SBSF Funds, Inc. dba Key Mutual Funds, Sefton
Funds, The Sessions Group, Summit Investment Trust, The Time Horizon
Funds, Variable Insurance Funds, and The Victory Portfolios each of
which is a management investment company. The parent of BISYS Fund
Services, Inc. (the sole general partner of BISYS Fund Services) is The
BISYS Group, Inc.
(b) Partners of BISYS Fund Services as of the date of this Part C are
as follows:
Positions Positions and
Name and Principal Offices with The Offices with
Business Addresses Winsbury Company The Registrant
- ------------------ ---------------- --------------
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, NJ 07424
BISYS Fund Services, Inc. Sole General None
3435 Stelzer Road Partner
Columbus, OH 43219
4
<PAGE> 122
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) Sanwa Bank California, 601 S. Figueroa Street, Los Angeles,
California 90017 (records relating to the Advisor's functions as
investment adviser).
(2) BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its functions as administrator,
distributor, transfer agent, and fund accountant).
(3) The Bank of New York, 90 Washington Street, New York, New York
10286 (records relating to its function as custodian).
(4) Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite
800 East, Washington, DC 20005 (the Registrant's Declaration
of Trust, By-Laws, and Minute Books).
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to call a meeting of the shareholders for
the purpose of voting upon the question of removal of one or more
trustees when requested to do so by the holders of at least 10% of the
outstanding shares of Registrant and to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communication.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
Registrant hereby undertakes to file a post-effective amendment
including financial statements, which need not be audited, for each of
the Sanwa Prime Money Market Fund, the Sanwa U.S. Treasury Obligations
Fund, the Sanwa Investment Grade Bond Fund, the Sanwa Global Asset
Allocation Fund, and the Sanwa Equity Fund (each a "Fund"), within
four to six months of the commencement of that Fund's operations.
5
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 2 to Registrant's Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City
of Washington, D.C., on the 3rd day of October, 1997.
Sanwa Mutual Funds Group
By: George O. Martinez*
------------------------------
George O. Martinez
Trustee
Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment No. 2 to Registrant's Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated:
Signature Capacity
- --------- --------
George O. Martinez* Trustee
- --------------------
*By: /s/ Brian L. Murray, Jr.
-------------------------
Brian L. Murray, Jr.
Attorney-In-Fact
<PAGE> 124
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
(5) Form of Investment Advisory Agreement between
Registrant and Sanwa Bank California is filed herewith.
(6) Form of Distribution Agreement.
(8) (a) Form of Custody Agreement between Registrant and
The Bank of New York is filed herewith.
(b) Form of Foreign Custody Manager Agreement between
Registrant and The Bank of New York is filed
herewith.
(9) (a) Form of Transfer Agency Agreement between
Registrant and BISYS Fund Services, Inc. is filed
herewith.
(b) Form of Fund Accounting Agreement between
Registrant and BISYS Fund Services, Inc. is filed
herewith.
(c) Form of Administration Agreement between
Registrant and BISYS Fund Services Limited
Partnership filed is filed herewith.
(d) Form of Service Plan.
(e) Form of service agreements pursuant to Service
Plan referred to herein as Exhibit (9)(d) is filed
herewith.
(10) Opinion and Consent of Counsel as to legality of shares
being registered is filed herewith.
(11) (a) Consent of Ropes & Gray, is filed herewith.
(b) Consent of Ernst & Young, is filed herewith.
(13) Form of Purchase Agreement is filed herewith.
(15) (a) Form of Distribution and Shareholder Services Plan
is filed herewith.
(b) Forms of Servicing Agreement pursuant to
Distribution and Shareholder Services Plan referred
to herein as Exhibit 15(a) is filed herewith.
(18) Form of Multiple Class Plan is filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of November __, 1997 between the Eureka Funds, a
Massachusetts business trust (hereinafter called the "Trust"), and Sanwa Bank
California, a state chartered bank with its principal office in Los Angeles,
California (hereinafter called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
certain investment advisory and related services described below in connection
with the management of each of the investment portfolios of the Trust identified
on Schedule A hereto (the "Funds"), and the Investment Adviser desires to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment
Adviser with copies properly certified or authenticated of each of the following
documents:
(a) the Trust's Agreement and Declaration of Trust, dated
April 7, 1997 and filed with the Secretary of State of The Commonwealth of
Massachusetts, and all amendments thereto or restatements thereof (such
Agreement and Declaration of Trust, as presently in effect and as it shall from
time to time be amended or restated, is herein called the "Declaration of
Trust");
(b) the Trust's Bylaws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the Securities and Exchange Commission on
July 31, 1997 and all amendments thereto;
<PAGE> 2
(e) the Trust's current Registration Statement on Form N-lA
under the Securities Act of 1933, as amended ("1933 Act"), and under the 1940
Act as filed with the Securities and Exchange Commission; and
(f) the Funds' most recent prospectuses and the Trust's
Statement of Additional Information relating to the Funds (such prospectuses and
Statement of Additional Information, as presently in effect, and all amendments
and supplements thereto are herein collectively called the "Prospectus" or the
"Prospectuses").
The Trust will promptly furnish the Investment Adviser with copies of
all amendments of or supplements to the foregoing documents.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide or cause to be provided a
continuous investment program for each Fund identified on Schedule A hereto,
including investment research and management with respect to all securities and
investments and cash equivalents in such Funds. The Investment Adviser will
determine or cause to be determined from time to time what securities and other
investments will be purchased, retained or sold by the Trust with respect to
each Fund identified on Schedule A hereto and will place or cause to be placed
orders for purchase and sale on behalf of the Trust with respect to such Fund.
The Investment Adviser will provide the services under this Agreement
in accordance with each Fund's investment objective, policies and restrictions
as stated in the Prospectuses, resolutions of the Trust's Board of Trustees, and
any undertakings with regulatory authorities which are provided by the Trust to
the Investment Adviser. The Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will comply in all material respects with all applicable
Rules and Regulations of the Securities and Exchange Commission under the
Investment Company Act of 1940 and in addition will conduct its activities under
this Agreement in accordance with any applicable regulations pertaining to the
investment advisory activities of the Investment Adviser;
(c) will place or cause to be placed orders for the Funds
identified on Schedule A hereto either directly with the issuer or with any
broker or dealer and, in placing orders with brokers and dealers, the Investment
Adviser or any sub-investment adviser employed by the Investment Adviser will
attempt to obtain prompt execution of orders in an effective manner at the most
favorable price. Consistent with this obligation, when the execution and price
offered by two or more brokers or dealers are comparable, the Investment Adviser
or any sub-investment adviser employed by the Investment Adviser may, in its
discretion,
-2-
<PAGE> 3
purchase and sell portfolio securities to and from brokers and dealers who
provide the Investment Adviser or any such subinvestment adviser with research
advice and other services; and
(d) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust and prior,
present, or potential shareholders of the Trust learned by, or disclosed to, the
Investment Adviser in the course of its performance of its responsibilities and
duties under this Agreement, and will not 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
Investment Adviser may be exposed to civil, regulatory, or criminal sanctions
for failure to comply when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
4. Use of Sub-Investment Adviser. The Investment Adviser may, subject
to the approvals required under the 1940 Act, employ a sub-investment adviser to
assist the Investment Adviser in the performance of its duties under this
Agreement. Such use does not relieve the Investment Adviser of any duty or
liability it would otherwise have under this Agreement. Compensation of any such
sub-investment adviser for services provided and expenses assumed under any
agreement between the Investment Adviser and such sub-investment adviser
permitted under this paragraph is the sole responsibility of the Investment
Adviser.
5. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive. Except to
the extent necessary to perform the Investment Adviser's obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the right of the
Investment Adviser, or any subsidiary or affiliate of the Investment Adviser, or
any employee of the Investment Adviser, to engage in any other business or to
devote time and attention to any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other person.
6. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Investment Adviser 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.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 3la-2 under the 1940 Act the records required to be maintained by Rule
3la-1 under the 1940 Act.
7. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions or charges, if any) purchased for the Trust. The Trust will be
responsible for all of the Trust's expenses and liabilities.
-3-
<PAGE> 4
8. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee
computed daily and paid monthly on the first business day of each month equal to
the lesser of (i) the fee at the applicable annual rate set forth on Schedule A
hereto or (ii) such fee as may from time to time be agreed upon in writing by
the Trust and the Investment Adviser. If the fee payable to the Investment
Adviser pursuant to this paragraph begins to accrue after the beginning of any
month or if this Agreement terminates before the end of any month, the fee for
the period from such date to the end of such month or from the beginning of such
month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating fees, the
value of a Fund's net assets shall be computed in the manner specified in the
Prospectus and the Trust's Declaration of Trust for the computation of the value
of the Fund's net assets in connection with the determination of the net asset
value of the Fund's shares.
9. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty under the Investment Company Act of
1940 with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. In no case
shall the Investment Adviser be liable for actions taken or nonactions with
respect to the performance of services under this Agreement based upon specific
information, instructions, or requests given or made to the Investment Adviser
by an officer of the Trust thereunto duly authorized.
10. Duration and Termination. This Agreement will become effective as
to a particular Fund as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
such Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until October 31,
1999. Thereafter, if not terminated, this Agreement shall continue in effect as
to a particular Fund for successive periods of twelve months each ending on
October 31 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of the outstanding voting
securities of such Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to a particular Fund at any time on sixty days' written notice,
without the payment of any penalty, by the Trust (by vote of the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of
such Fund) or by the Investment Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the
-4-
<PAGE> 5
terms "majority of the outstanding voting securities", "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. Legal Advice. The Investment Adviser shall notify the Trust at any
time the Investment Adviser believes that it is in need of the advice of counsel
with regard to its responsibilities and duties pursuant to this Agreement; if
the Investment Adviser wishes to seek the advice of legal counsel of its own
choosing it must first notify the Trust and seek its approval, which shall not
be unreasonably withheld, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving the Investment Adviser's willful
misfeasance, bad faith, gross negligence or reckless disregard with respect to
the Investment Adviser's responsibilities and duties hereunder and the
Investment Adviser shall in no event be liable to the Trust or any Fund or any
shareholder or beneficial owner of the Trust for any action reasonably taken
pursuant to such advice.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by the
laws of The Commonwealth of Massachusetts. Each party hereby consents to the
jurisdiction of a state or federal court situated in Los Angeles County,
California in connection with any dispute arising hereunder and hereby waives
its right to trial by jury.
The names "Eureka Funds" and "Trustees of Eureka Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of April 7, 1997 to which reference is hereby made
and a copy of which is on file at the office of the Secretary of State of The
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of "Eureka
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series of shares of the Trust must look solely to the assets of the
Trust belonging to such series for the enforcement of any claims against the
Trust.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Eureka Funds
By:
------------------------
Title:
Sanwa Bank California
By:
------------------------
Title:
-6-
<PAGE> 1
EXHIBIT 6
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made this 1st day of November, 1997, between
______________________ (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES
("Distributor"), having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as a Massachusetts business trust and registered with the Securities
and Exchange Commission (the "Commission") under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
------------------------
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Trust then in
effect under the Securities Act of 1933, as amended (the "Securities Act"). As
used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Trust understands that Distributor is now and may in the future be the
distributor of the shares of several investment companies or series (together,
"Companies") including Companies having investment objectives similar to those
of the Trust. The Trust further understands that investors and potential
investors in the Trust may invest in shares of such other Companies. The Trust
agrees that Distributor's duties to such Companies shall not be deemed in
conflict with its duties to the Trust under this paragraph 1.2.
<PAGE> 2
Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable, which are primarily intended to result in
the sale of the Shares, including, but not limited to, advertising, compensation
of underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
1.3 In its capacity as distributor of the Shares, all
activities of Distributor and its partners, agents, and employees shall comply
with all applicable laws, rules and regulations, including, without limitation,
the 1940 Act, all rules and regulations promulgated by the Commission thereunder
and all rules and regulations adopted by any securities association registered
under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during
normal business hours, to respond to telephone questions with respect to the
Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by
unusual market, economic or political conditions, or by abnormal circumstances
of any kind, the Trust's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal
if it chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized list
of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to
the Shares, all registration statements and prospectuses filed by the Trust with
the Commission under the Securities Act have been carefully prepared in
conformity with requirements of said Act and rules and
2
<PAGE> 3
regulations of the Commission thereunder. The registration statement and
prospectus contain all statements required to be stated therein in conformity
with said Act and the rules and regulations of said Commission and all
statements of fact contained in any such registration statement and prospectus
are true and correct. Furthermore, neither any registration statement nor any
prospectus includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Shares. The Trust may, but shall
not be obligated to, propose from time to time such amendment or amendments to
any registration statement and such supplement or supplements to any prospectus
as, in the light of future developments, may, in the opinion of the Trust's
counsel, be necessary or advisable. If the Trust shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Trust of a written request from Distributor to do so,
Distributor may, at its option, terminate this Agreement. The Trust shall not
file any amendment to any 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.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its partners and
employees and any such controlling
3
<PAGE> 4
person, as aforesaid, is expressly conditioned upon the Trust being notified of
any action brought against Distributor, its partners or employees, or any such
controlling person, such notification to be given by letter or by telegram
addressed to the Trust at its principal office in Columbus, Ohio and sent to the
Trust by the person against whom such action is brought, within 10 days after
the summons or other first legal process shall have been served. The failure to
so 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 allegedly untrue, statement or
omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 1.11. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the Trust and approved by Distributor, which approval shall
not be unreasonably withheld. In the event the Trust elects to assume the
defense of any such suit and retain counsel of good standing approved by
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its partners and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.11 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
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to
Distributor's benefit, to the benefit of its several partners and employees, and
their respective estates, and to the benefit of the 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 Shares.
1.12 Distributor agrees to indemnify, defend and hold the
Trust, its several officers and Trustees and any person who controls the Trust
within the meaning of Section 15 of the Securities Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its officers or
Trustees or any such controlling person, may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Trust, its officers or Trustees or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by Distributor to the Trust and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the
Trust required to be stated in such answers or necessary to make such
information not misleading. Distributor's agreement to indemnify the Trust, its
officers and
4
<PAGE> 5
Trustees, and any such controlling person, as aforesaid, is expressly
conditioned upon Distributor being notified of any action brought against the
Trust, its officers or Trustees, or any such controlling person, such
notification to be given by letter or telegram addressed to Distributor at its
principal office in Columbus, Ohio, and sent to Distributor by the person
against whom such action is brought, within 10 days after the summons or other
first legal process shall have been served. Distributor shall have the right of
first control of the defense of such action, with counsel of its own choosing,
satisfactory to the Trust, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the
Trust, its officers or Trustees or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the Trust,
its officers or Trustees, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission, otherwise
than on account of Distributor's indemnity agreement contained in this paragraph
1.12.
1.13 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 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 Securities Act or if and so long as a current prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this paragraph 1.13 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 Trust's
prospectus, Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as
reasonably practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for
amendments to the registration statement or
prospectus then in effect or for additional
information;
(b) in the event of the issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement
or prospectus then in effect or the
initiation by service of process on the
Trust of any proceeding for that purpose;
(c) of the happening of any event that makes
untrue any statement of a material fact made
in the registration statement or prospectus
then in effect or which requires the making
of a change in such registration statement
or prospectus in order to make the
statements therein not misleading; and
5
<PAGE> 6
(d) of all action of the Commission with respect
to any amendment to any registration
statement or prospectus which may from time
to time be filed with the Commission.
For purposes of this section, informal requests by or acts
of the Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners
and employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential 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 Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
2. Fee.
----
Distributor shall receive from the Funds identified in the
Distribution Plan attached as Schedule A hereto a distribution fee at the rate
and upon the terms and conditions set forth in such Distribution Plan.
Distributor shall receive from the Funds identified in the Shareholder Servicing
Plan attached as Schedule B hereto a shareholder servicing fee at the rate and
upon the terms and conditions set forth in such Shareholder Servicing Plan. The
distribution fee and shareholder servicing fee shall be accrued daily and shall
be paid on the first business day of each month, or at such time(s) as the
Distributor shall reasonably request.
3. Term, Duration and Termination.
-------------------------------
This Agreement shall become effective as of the date first
written above and, unless sooner terminated as provided herein, shall continue
until October 31, 1999. Thereafter, if not terminated, this Agreement shall
continue with respect to a particular Fund automatically for successive one-year
terms, provided that such continuance is specifically approved at least annually
by (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting for the purpose of voting on such approval
and (b) by the vote of the Trust's Board of Trustees or the vote of a majority
of the outstanding voting securities of such Fund. This Agreement is terminable
without penalty, on not less than sixty days' prior written notice, by the
Trust's Board of Trustees, by vote of a majority of the outstanding voting
securities of the Trust or by the Distributor. This Agreement will also
terminate automatically in the event of its assignment. (As used in this
6
<PAGE> 7
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meanings as ascribed
to such terms in the 1940 Act.)
4. Limitation of Liability of the Trustees and Shareholders.
---------------------------------------------------------
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
_____________________________ BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
7
<PAGE> 8
Dated: November 1, 1997
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
-------------------------
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DISTRIBUTION PLAN
A-1
<PAGE> 9
Dated: November 1, 1997
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
-------------------------
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
SHAREHOLDER SERVICING PLAN
B-1
<PAGE> 1
EXHIBIT 8(a)
CUSTODY AGREEMENT
Agreement made as of this day of , 1997, between THE EUREKA FUNDS, a
Massachusetts business trust organized and existing under the laws of the State
of Massachusetts, having its principal office and place of business at 3435
Stelyer Road, Columbus, Ohio 43219 (hereinafter called the "Fund"), and THE
BANK OF NEW YORK, a New York corporation authorized to do a banking business,
having its principal office and place of business at 48 Wall Street, New York,
New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any two Officers, and the term Certificate shall also include
Instructions.
4. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange
<PAGE> 2
qualified to act as a custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
5. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
Securities (excluding Futures Contracts) which are owned by the writer thereof
and subject to appropriate restrictions.
7. "Composite Currency Unit" shall mean the European Currency Unit or any
other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identified in a certified
copy of a resolution of the Fund's Board of Trustees specifically approving
deposits therein by the Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency
- 2 -
<PAGE> 3
against the sale by it to the other party of an agreed amount
in another Currency.
14. "Instructions" shall mean instructions communications transmitted by
electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Officer or unsigned) and tested telex.
15. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry in its books and records.
16. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority,
commercial paper, certificates of deposit and bankers' acceptances, repurchase
agreements with respect to the same and bank time deposits, where the purchase
and sale of such securities normally requires settlement in federal funds on
the same day as such purchase or sale.
17. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
18. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer, and any other person or persons, whether or
not any such other person is an officer of the Fund, duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
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<PAGE> 4
19. "Option" shall mean a Call Option, Covered Call Option, Stock
Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from an Officer or from a person reasonably believed by the
Custodian to be an Officer.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or
representing any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account
in which certain Securities and/or other assets of the Fund specifically
allocated to such Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund listed
on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a
particular Series.
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<PAGE> 5
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and money at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all
Securities eligible for deposit therein, regardless of the Series to which the
same are specifically allocated and to utilize the Book-Entry System to the
extent possible in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities and
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<PAGE> 6
deliveries and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in the Depository, the Fund shall
deliver to the Custodian a certified resolution of the Board of Trustees of the
Fund, substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate actually received by the Custodian to deposit in
the Depository all Securities specifically allocated to such Series eligible
for deposit therein, and to utilize the Depository to the extent possible with
respect to such Securities in connection with its performance hereunder,
including, without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and money deposited in either the Book-Entry
System or the Depository will be represented in accounts which include only
assets held by the Custodian for customers, including, but not limited to,
accounts in which the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's accepting,
utilizing and acting with respect to Clearing Member confirmations for Options
and transactions in Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's Board of
Trustees, substantially in the form of Exhibit C hereto, approving, authorizing
and instructing the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by the Custodian,
to accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of
all transfers to or from
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<PAGE> 7
the account of the Fund for a Series, either hereunder or with any co-custodian
or sub-custodian appointed in accordance with this Agreement during said day.
Where Securities are transferred to the account of the Fund for a Series, the
Custodian shall also by book-entry or otherwise identify as belonging to such
Series a quantity of Securities in a fungible bulk of Securities registered in
the name of the Custodian (or its nominee) or shown on the Custodian's account
on the books of the Book-Entry System or the Depository. At least monthly and
from time to time, the Custodian shall furnish the Fund with a detailed
statement, on a per Series basis, of the Securities and money held by the
Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the
name of any duly appointed registered nominee of the Custodian as the Custodian
may from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time
to time be registered in the name of the Fund. The Custodian shall hold all
such Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of
such Series physically segregated at all times from those of any other person
or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or
through the use of the Book-Entry System or the Depository with respect to
Securities held hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with preceding paragraph
4:
(a) collect all income, dividends and distributions due or payable;
(b) give notice to the Fund and present payment and collect the
amount payable upon such Securities which are called, but only if either (i)
the Custodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix C annexed
hereto, which may be amended at any time by the
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<PAGE> 8
Custodian without the prior notification or consent of the
Fund;
(c) present for payment and collect the amount payable upon all
Securities which mature;
(d) surrender Securities in temporary form for definitive
Securities;
(e) execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations of
any other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agrement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise
of any conversion privilege and receive and hold hereunder specifically
allocated to such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee,
reorganization committee or other person
- 8 -
<PAGE> 9
in connection with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and receive and hold
hereunder specifically allocated to such Series such certificates of deposit,
interim receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of
the Fund; and
(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of
the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker,
dealer, or futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form customarily used by
brokers, dealers, or future commission merchants with respect to such Futures
Contracts, Options, or Futures Contract Options, as the case may be, confirming
that such Security is held by such broker, dealer or futures commission
merchant, in book-entry form or otherwise, in the name of the Custodian (or any
nominee of the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the
Margin Account Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in this Agreement
to the contrary, make payment for any Futures Contract, Option, or Futures
Contract Option for which such instruments or such certificates are available
only against
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<PAGE> 10
the delivery to the Custodian of such instrument or such certificate, and
deliver any Futures Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if
any; and (h) the name of the broker to whom payment is to be made. The
Custodian shall, upon receipt of Securities purchased by or for the Fund, pay
to the broker specified in the Certificate out of the money held for the
account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale
of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each such sale:
(a) the Series to which such Securities were specifically allocated; (b) the
name of the issuer and the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the date of sale; (e)
the sale price per unit; (f) the total amount payable to the Fund upon such
sale; (g) the name of the broker through whom or the person to whom the sale
was made, and the name of the clearing broker, if
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<PAGE> 11
any; and (h) the name of the broker to whom the Securities are to be delivered.
The Custodian shall deliver the Securities specifically allocated to such
Series to the broker specified in the Certificate against payment of the total
amount payable to the Fund upon such sale, provided that the same conforms to
the total amount payable as set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of money held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund
upon such sale; and (h) the name of the Clearing Member through whom the sale
was made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same
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<PAGE> 12
conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the Call Option; (c)
the expiration date; (d) the date of exercise and settlement; (e) the exercise
price per share; (f) the total amount to be paid by the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such Call Option
was exercised. The Custodian shall, upon receipt of the Securities underlying
the Call Option which was exercised, pay out of the money held for the account
of the Series to which such Call Option was specifically allocated the total
amount payable to the Clearing Member through whom the Call Option was
exercised, provided that the same conforms to the total amount payable as set
forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise
price per share; (f) the total amount to be paid to the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such Put Option
was exercised. The Custodian shall, upon receipt of the amount payable upon the
exercise of the Put Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the same conforms to
the amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund
in connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for
- 12 -
<PAGE> 13
which the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of
the Clearing Member through whom the premium is to be received. The Custodian
shall deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct
the Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has
the right, upon prior written notification to the Fund, at any time to refuse
to issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered
Call Option and specifying: (a) the Series for which such Covered Call Option
was written; (b) the name of the issuer and the title and number of shares
subject to the Covered Call Option; (c) the Clearing Member to whom the
underlying Securities are to be delivered; and (d) the total amount payable to
the Fund upon such delivery. Upon the return and/or cancellation of any
receipts delivered pursuant to paragraph 6 of this Article, the Custodian shall
deliver, or direct the Depository to deliver, the underlying Securities as
specified in the Certificate against payment of the amount to be received as
set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer
and the title and number of shares for which the Put Option is written and
which underlie the same; (c) the expiration date; (d) the exercise price; (e)
the premium to be received by the Fund; (f) the date such Put Option is
written; (g) the name of the Clearing Member through whom the premium is to be
received and to whom a Put Option guarantee letter is to be delivered; (h) the
amount of cash, and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for
such Series; and (i) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account
- 13 -
<PAGE> 14
specified in the Certificate, issue a Put Option guarantee letter substantially
in the form utilized by the Custodian on the date hereof, and deliver the same
to the Clearing Member specified in the Certificate against receipt of the
premium specified in said Certificate. Notwithstanding the foregoing, the
Custodian shall be under no obligation to issue any Put Option guarantee letter
or similar document if it is unable to make any of the representations
contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery;
(e) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the money held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in the Senior Security Account for such Series; (j)
the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian
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<PAGE> 15
has specifically agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make the
deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is
being exercised; (d) the total amount payable upon such exercise, and whether
such amount is to be paid by or to the Fund; (e) the amount of cash and/or
amount and kind of Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series; and the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Collateral Account for such Series. Upon the return and/or cancellation of the
receipt, if any, delivered pursuant to the preceding paragraph of this Article,
the Custodian shall pay out of the money held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order
to liquidate its position as a writer of an Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase Transaction;
(b) the Series for which the Option was written; (c) the name of the issuer and
the title and number of shares subject to the Option, or, in the case of a
Stock Index Option, the stock index to which such Option relates and the number
of Options held; (d) the exercise price; (e) the premium to be paid by the
Fund; (f) the expiration date; (g) the type of Option (put or call); (h) the
date of such purchase; (i) the name of the Clearing Member to whom the premium
is to be paid; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium and the return and/or cancellation of any
receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with respect
to the Option being liquidated through the Closing Purchase Transaction, the
Custodian shall remove,
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<PAGE> 16
or direct the Depository to remove, the previously imposed restrictions on
the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein,
and upon the return and/or cancellation of any receipts issued by the
Custodian, shall make such withdrawals from the Collateral Account, and the
Margin Account and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts entered into; (d)
the delivery or settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date; (f) whether
the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities,
if any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment
out of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and deposit in the Senior
Security Account for such Series the amount of cash and/or the amount and kind
of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
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<PAGE> 17
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or
received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made
or received; and (d) the amount of cash and/or Securities to be withdrawn from
the Senior Security Account for such Series. The Custodian shall make the
payment or delivery specified in the Certificate, and delete such Futures
Contract from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a future commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
future commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such future commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such
a Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the future commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the
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<PAGE> 18
Custodian shall not be liable for the acts or omissions of any such future
commission merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian shall
pay out of the money specifically allocated to such Series, the total amount to
be paid upon such purchase to the broker or futures commissions merchant
through whom the purchase was made, provided that the same conforms to the
amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series
to which such Futures Contract Option was specifically allocated; (b) the type
of Future Contract Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund
upon such sale; and (h) the name of the broker of futures commission merchant
through whom the sale was made. The Custodian shall consent to the cancellation
of the Futures Contract Option being closed against payment to the Custodian of
the total amount payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures
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<PAGE> 19
commission merchant through whom the Futures Contract Option is exercised; (f)
the net total amount, if any, payable by the Fund; (g) the amount, if any, to
be received by the Fund; and (h) the amount of cash and/or the amount and kind
of Securities to be deposited in the Senior Security Account for such Series.
The Custodian shall make, out of the money and Securities specifically
allocated to such Series, the payments, if any, and the deposits, if any, into
the Senior Security Account as specified in the Certificate. The deposits, if
any, to be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option; (d) the
expiration date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant through whom
the premium is to be received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior Security Account for
such Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
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<PAGE> 20
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type
of Futures Contract underlying such Futures Contract Option; (d) the name of
the broker or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the Fund upon
such exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made
by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect
to the Futures Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is a closing
transaction; (c) the type of Future Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f)
the expiration date; (g) the name of the broker or futures commission merchant
to whom the premium is to be paid; and (h) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the withdrawals from the
Senior Security Account specified in the Certificate. The withdrawals, if any,
to be made from the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and, (b) make such withdrawals from and/or in the case
of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the
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<PAGE> 21
Margin Account, if any, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article
VI hereof.
10. Notwithstanding any other provision in this Agreement to the contrary,
the Custodian shall deliver cash and Securities to a future commission merchant
upon receipt of a Certificate from the Fund specifying: (a) the name of the
future commission merchant; (b) the specific cash and Securities to be
delivered; (c) the date of such delivery; and (d) the date of the agreement
between the Fund and such future commission merchant entered pursuant to Rule
17f-6 under the Investment Company Act 1940, as amended. Each delivery of such
a Certificate by the Fund shall constitute (x) a representation and warranty by
the Fund that the Rule 17f-6 agreement has been duly authorized, executed and
delivered by the Fund and the future commission merchant and complies with Rule
17f-6, and (y) an agreement by the Fund that the Custodian shall not be liable
for the acts or omissions of any such future commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and
settlement; (e) the sale price per unit; (f) the total amount credited to the
Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind
of Securities, if any, which are to be deposited in a Margin Account and the
name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be
deposited in a Senior Security Account, and (i) the name of the broker through
whom such short sale was made. The Custodian shall upon its receipt of a
statement from such broker confirming such sale and that the total amount
credited to the Fund upon such sale, if any, as specified in the Certificate is
held by such broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Fund, issue a receipt or make the deposits into
the Margin Account and the Senior Security Account specified in the
Certificate.
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<PAGE> 22
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
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<PAGE> 23
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money
Market Security, a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable by the Fund in
connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker
or dealer with or through whom the Reverse Repurchase Agreement is to be
terminated; and (f) the amount of cash and/or the amount and kind of Securities
to be withdrawn from the Senior Securities Account for such Series. The
Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate or Oral Instructions, make
the payment to the broker or dealer, and the withdrawals, if any, from the
Senior Security Account, specified in such Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each
such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the
loan of the Securities, including the amount of cash collateral and the
premium, if any, separately identified, and (f) the name of the broker, dealer,
or financial institution to which the loan was made. The Custodian shall
deliver the Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with
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<PAGE> 24
respect to each such loan termination and return of Securities: (a) the Series
to which the loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities to be returned, (c) the number of shares
or the principal amount to be returned, (d) the date of termination, (e) the
total amount to be delivered by the Custodian (including the cash collateral
for such Securities minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or financial institution
from which the Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution to which
such Securities were loaned and upon receipt thereof shall pay, out of the
money held for the account of the Fund, the total amount payable upon such
return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or
withdrawn from, a Senior Securities Account, the Custodian shall be under no
obligation to make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and
to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian
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<PAGE> 25
has made payment or delivery pursuant to any Put Option guarantee letter or
similar document or any receipt issued hereunder by the Custodian. In the event
the Custodian should realize on any such property net proceeds which are less
than the Custodian's obligations under any Put Option guarantee letter or
similar document or any receipt, such deficiency shall be a debt owed the
Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding
the delivery to the Fund of such statement, the Fund shall furnish to the
Custodian a Certificate specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated
to be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified
therein the date of the declaration of a dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to the Series specified
therein the declaration of
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<PAGE> 26
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral Instructions
or Certificate, as the case may be, the Custodian shall pay out of the money
held for the account of each Series the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the Fund with respect
to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price;
and
(b) the amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name
of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth
the Series and number of Shares received by the
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<PAGE> 27
Transfer Agent for redemption and that such Shares are in good form for
redemption, the Custodian shall make payment to the Transfer Agent out of the
money held in the separate account in the name of the Series the total amount
specified in the Certificate issued pursuant to the foregoing paragraph 4 of
this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form
for redemption in accordance with the check redemption procedure, honor the
check presented as part of such check redemption privilege out of the money
held in the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated
to such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement, (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such
rate to be adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6% per annum. In
addition, the Fund hereby agrees that the Custodian shall have a continuing
lien and security interest in and to any property specifically allocated to
such Series at any time held by it for the benefit of such Series or in which
the Fund may have an interest which is then in the Custodian's possession or
control or in possession or control of any third party acting in the
Custodian's behalf. The Fund
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<PAGE> 28
authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either
it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow
from a third party, or which next succeeds a Business Day on which at the close
of business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the
Custodian) from which it borrows money for investment or for temporary or
emergency purposes using Securities held by the Custodian hereunder as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such bank will loan to
the Fund against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such borrowing: (a) the Series to which such borrowing relates; (b) the name of
the bank, (c) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g)
the market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act
of 1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at the option of
the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return
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<PAGE> 29
of collateral as may be tendered to it. In the event that the Fund fails to
specify in a Certificate the Series, the name of the issuer, the title and
number of shares or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall not be under any
obligation to deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund agrees not to sell, reproduce, lease or otherwise
provide, directly or indirectly, the Software or any portion thereof to any
third party without the prior written consent of the Custodian.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made available
to the Fund by utilizing the Software (other than data bases relating solely to
the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which
are or become part of the public domain or are legally required to be made
available to the public) (collectively, the "Information"), are the exclusive
and confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties.
4. The Custodian reserves the right to modify the Software from time to
time upon reasonable prior notice and
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<PAGE> 30
the Fund shall install new releases of the Software as the Custodian may
direct. The Fund agrees not to modify or attempt to modify the Software without
the Custodian's prior written consent. The Fund acknowledges that any
modifications to the Software, whether by the Fund or the Custodian and whether
with or without the Custodian's consent, shall become the property of the
Custodian.
5. The Custodian makes no warranties or representations of any kind with
regard to the Software or the method(s) by which the Fund may transmit
Instructions to the Custodian, express or implied, including but not limited to
any implied warranties or merchantability or fitness for a particular purpose.
6. Where the method for transmitting Instructions by the Fund involves an
automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall
not be liable for any failure to act pursuant to such Instructions, the Fund
may not claim that such Instructions were received by the Custodian, and the
Fund shall deliver a Certificate by some other means.
7. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks associated with the various methods
of transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
8. The Fund hereby presents, warrants and covenants to the Custodian that
this Agreement has been duly approved by a resolution of its Board of Trustees,
and that its transmission of Instructions pursuant hereto shall at all times
comply with the Investment Company Act of 1940, as amended.
9. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable,
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<PAGE> 31
and in any event within 24 hours after the earliest of (i) discovery thereof,
(ii) the Business Day on which discovery should have occurred through the
exercise of reasonable care and (iii) in the case of any error, the date of
actual receipt of the earliest notice which reflects such error, it being
agreed that discovery and receipt of notice may only occur on a business day.
The Custodian shall promptly advise the Fund whenever the Custodian learns of
any errors, omissions or interruption in, or delay or unavailability of, the
Fund's ability to send Instructions.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Foreign Securities (as such term is defined in paragraph
(c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as amended) and
other assets, the foreign banking institutions and foreign securities
depositories and clearing agencies designated on Schedule I hereto ("Foreign
Sub-Custodians") to carry out their respective responsibilities in accordance
with the terms of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been previously delivered to
the Fund and receipt of which is hereby acknowledged (each such agreement, a
"Foreign Sub-Custodian Agreement"). Upon receipt of a Certificate, together
with a certified resolution substantially in the form attached as Exhibit E of
the Fund's Board of Trustees, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to act
as the Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a
Certificate from the Fund, the Custodian shall cease the employment of any one
or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and
such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the form
previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series
of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the
Fund or any Series against a Foreign Sub-Custodian as a consequence of any
loss, damage, cost, expense, liability or
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<PAGE> 32
claim sustained or incurred by the Fund or any Series if and to the extent that
the Fund or such Series has not been made whole for any such loss, damage, cost,
expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms
of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually agreed
upon, information concerning the Foreign Sub-Custodians employed by the
Custodian. Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the Fund's initial approval of such
Foreign Sub-Custodians and, in any event, shall include information pertaining
to (i) the Foreign Custodians' financial strength, general reputation and
standing in the countries in which they are located and their ability to
provide the custodial services required, and (ii) whether the Foreign
Sub-Custodians would provide a level of safeguards for safekeeping and custody
of securities not materially different form those prevailing in the United
States. The Custodian shall monitor the general operating performance of each
Foreign Sub-Custodian. The Custodian agrees that it will use reasonable care
in monitoring compliance by each Foreign Sub-Custodian with the terms of the
relevant Foreign Sub-Custodian Agreement and that if it learns of any breach of
such Foreign Sub-Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will promptly notify the
Fund of such breach. The Custodian also agrees to use reasonable and diligent
efforts to enforce its rights under the relevant Foreign Sub-Custodian
Agreement.
7. The Custodian shall transmit promptly to the Fund all notices, reports
or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
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<PAGE> 33
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series
and delivery of securities maintained for the account of such Series may be
effected in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the contrary,
with respect to any losses or damages arising out of or relating to any actions
or omissions of any Foreign Sub-Custodian the sole responsibility and liability
of the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the
Currency to be purchased, as specified in the Certificate or Oral Instructions,
the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and
receipts to be made in accordance with the customs prevailing from time to time
among brokers or dealers in Currencies, and
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<PAGE> 34
such receipt and delivery may not be completed simultaneously. The Fund assumes
all responsibility and liability for all credit risks involved in connection
with such receipts and deliveries, which responsibility and liability shall
continue until the Currency to be received by the Fund has been received in
full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary
of The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules,
regulations or orders shall prohibit or impose burdens or costs on the transfer
to, by or for the account of the Fund of Securities or any cash held outside
the Fund's jurisdiction or denominated in Currency other than its home
jurisdiction or the conversion of cash from one Currency into another currency.
The Custodian shall not be obligated to substitute another Currency for a
Currency (including a Currency that is a component of a Composite Currency
Unit) whose transferability, convertibility or availability has been affected
by such law, regulation, rule or procedure. Neither the Custodian nor any
Foreign Sub-Custodian shall be liable to the Fund for any loss resulting from
any of the foregoing events.
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<PAGE> 35
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither
the Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to
the Fund or of its own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by
the Fund;
(d) the legality of any borrowing by the Fund using Securities as
collateral;
(e) the legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
not be under
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<PAGE> 36
any duty or obligation periodically to check or notify the Fund that the amount
of such cash collateral held by it for the Fund is sufficient collateral for
the Fund, but such duty or obligation shall be the sole responsibility of the
Fund. In addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer or financial institution to which portfolio Securities
of the Fund are lent pursuant to Article X of this Agreement makes payment to
it of any dividends or interest which are payable to or for the account of the
Fund during the period of such loan or at the termination of such loan,
provided, however, that the Custodian shall promptly notify the Fund in the
event that such dividends or interest are not paid and received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund
is entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by
the final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed,
retired, called or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities held in the
Depository the Custodian shall make a claim against the Depository on behalf of
the Fund, except that the Custodian shall not be under any obligation to appear
in, prosecute or defend any action suit or proceeding in respect to any
Securities held by the
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<PAGE> 37
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished
as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by
a Certificate and (ii) it shall be assured to its satisfaction of reimbursement
of its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund
and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian
shall also be entitled to charge against any money held by it for the account
of a Series such Series' pro
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<PAGE> 38
rata share (based on such Series net asset value at the time of the charge to
the aggregate net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this Agreement. The
expenses for which the Custodian shall be entitled to reimbursement hereunder
shall include, but are not limited to, the expenses of sub-custodians and
foreign branches of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable
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<PAGE> 39
request of the Fund, copies of any such books and records shall be provided by
the Custodian to the Fund or the Fund's authorized representative, and the Fund
shall reimburse the Custodian its expenses of providing such copies. Upon
reasonable request of the Fund, the Custodian shall provide in hard copy or on
micro-film, whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or are
similarly maintained, and the Fund shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any such liability,
claim, loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
- 39 -
<PAGE> 40
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. In the event such notice is given by the
Custodian, the Fund shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of acceptance by
the successor custodian on that date deliver directly to the successor
custodian all Securities and money then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby
be relieved of all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the Book Entry System
which cannot be delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers. The Fund agrees to furnish to the
Custodian a new
- 40 -
<PAGE> 41
Certificate in similar form in the event that any such present Officer ceases
to be an Officer or in the event that other or additional Officers are elected
or appointed. Until such new Certificate shall be received, the Custodian shall
be fully protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the Officers as set forth in the last delivered
Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
8. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The State of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument
- 41 -
<PAGE> 42
are not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 42 -
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
THE EUREKA FUNDS
[SEAL] By:
----------------------
Attest:
- -----------------------
THE BANK OF NEW YORK
[SEAL] By:
----------------------
Name:
Title:
Attest:
- -----------------------
- 43 -
<PAGE> 44
APPENDIX A
I, , President and I,
, of THE EUREKA FUNDS, a Massachusetts business trust (the
"Fund"), do hereby
certify that:
The following individuals serve in the following positions with the Fund
and each has been duly elected or appointed by the Board of Trustees of the
Fund to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
- -------------------- ------------------- -----------------
<PAGE> 45
APPENDIX B
SERIES
<PAGE> 46
APPENDIX C
I, , a Vice President with THE
BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 47
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of THE EUREKA FUNDS, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1997, at which a
quorum was at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1997, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book- Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE EUREKA
FUNDS, as of the day of , 1997.
------------------------------
[SEAL]
<PAGE> 48
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of THE EUREKA FUNDS, a Massachusetts business trust
(the "Fund"), and further certifies that the following resolution was adopted by
the Board of Trustees of the Fund at a meeting duly held on ,
1997, at which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1997, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in the Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the Depository to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales
of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE EUREKA
FUNDS, as of the day of , 1997.
--------------------------------
[SEAL]
<PAGE> 49
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the
duly elected and acting of THE EUREKA FUNDS, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1997, at
which a quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1997, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE EUREKA
FUNDS, as of the day of , 1997.
---------------------------
[SEAL]
<PAGE> 50
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly
elected and acting of THE EUREKA FUNDS, a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1997, at which
a quorum was at all times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1997, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary, to accept, utilize
and act with respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which the same are
specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE EUREKA
FUNDS, as of the day of , 1997.
--------------------------
[SEAL]
<PAGE> 51
EXHIBIT D
The undersigned, , hereby certifies that he or she is the duly
elected and acting of THE EUREKA FUNDS, a Massachusetts business trust (the
"Fund"), further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1997, at which
a quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of
, 1997 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with, and to rely on
Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to Officers of the Fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard
and protect the confidentiality and availability of user and access codes,
passwords and authentication keys, and shall use Instructions only in a
manner that does not contravene the Investment Company Act of 1940, as
amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE EUREKA
FUNDS, as of the day of , 1997.
--------------------------
[SEAL]
<PAGE> 52
EXHIBIT E
The undersigned, , hereby certifies that he or she is the
duly elected and acting of THE EUREKA FUNDS, a Massachusetts business trust (the
"Fund"), further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1997, at
which a quorum was at all times present and that such resolutions have not been
modified or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country
listed in Schedule I hereto be, and hereby is, approved by the Board of
Trustees as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located
in the countries specified therein, and with the foreign sub-custodians
and depositories listed in Schedule I located in the countries specified
therein be, and hereby is, approved by the Board of Trustees as consistent
with the best interest of the Fund and its shareholders; and further
RESOLVED, that the Sub-Custodian Agreements presented to this meeting
between the Bank and each of the foreign sub-custodians and depositories
listed in Schedule I providing for the maintenance of the Fund's assets
with the applicable entity, be and hereby are, approved by the Board of
Trustees as consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby
authorized to place assets of the Fund with the aforementioned foreign
branches and foreign sub-custodians and depositories as hereinabove
provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them,
are authorized to do any and all other acts, in the name of the Fund and
on its behalf, as they, or any of them, may determine to be necessary or
desirable and proper in connection with or in furtherance of the foregoing
resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of THE EUREKA
FUNDS, as of the day of , 1997.
[SEAL]
<PAGE> 1
Exhibit 8(b)
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of _______________, between EUREKA FUNDS (the "Fund")
and The Bank of New York ("BNY").
WITNESSETH:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager on
the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform the
duties set forth herein on the terms and condition contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and BNY hereby agrees as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. Capitalized terms used in this Agreement and not otherwise defined in
this Agreement shall have the meanings given such terms in the Rule.
2. "Board" shall mean the board of directors or board of trustees, as the
case may be, of the Fund.
3. "Eligible Foreign Custodian" shall have the meaning provide in the
Rule, except that it shall not include any Securities Depository the use of
which is mandatory (i) by law or regulation, (ii) because securities cannot be
withdrawn from such Securities Depository, or (iii) because maintaining
securities outside such Securities Depository is not consistent with prevailing
custodial practices.
4. "Monitoring System" shall mean a system established by BNY to fulfill
the Responsibilities specified in clauses (d) and (e) of Article III of this
Agreement.
5. "Responsibilities" shall mean the responsibilities delegated to BNY as
a Foreign Custody Manager with respect to each Specified Country, as such
responsibilities are more fully described in Article III of this Agreement.
6. "Rule" shall mean Rule 17f-5 under the Investment Company Act of 1940,
as amended, as such Rule became effective on June 16, 1997.
<PAGE> 2
7. "Specified Country" shall mean each country listed on Schedule I
attached hereto and each country, other than the United States, constituting
the primary market for a security with respect to which the Fund has given
settlement instructions to The Bank of New York as custodian (the "Custodian")
under its Custody Agreement with the Fund.
ARTICLE II
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect
to each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect
to each Specified Country and agrees in performing the Responsibilities as a
Foreign Custody Manager to exercise reasonable care, prudence and diligence
such as a person having responsibility for the safekeeping of the Fund's assets
would exercise.
3. BNY shall provide to the Board at such times as the Board deems
reasonable and appropriate based on the circumstances of the Fund's foreign
custody arrangements written reports notifying the Board of the placement of
assets of the Fund with a particular Eligible Foreign Custodian within a
Specified Country selected by BNY and of any material change in the arrangements
with respect to assets of the Fund with any such Eligible Foreign Custodian.
ARTICLE III
RESPONSIBILITIES
1. BNY shall with respect to each Specified Country and each Eligible
Foreign Custodian selected by BNY: (a) determine that assets of the Fund held by
such Eligible Foreign Custodian will be subject to reasonable care, based on the
standards applicable to custodians in the relevant market in which such Eligible
Foreign Custodian operates, after considering all factors relevant to the
safekeeping of such assets, including, without limitation, those contained in
Section (c)(1) of the Rule; (b) determine that the Fund's foreign custody
arrangements with each Eligible Foreign Custodian selected by BNY are governed
by a written contract with the Custodian (or, in the case of an Eligible Foreign
Custodian selected by BNY which is a Securities Depository, by such a contract,
by the rules or established practices or procedures of the Securities
Depository, or by any combination of the foregoing) which will provide
reasonable care for the Fund's assets based on the standards specified in
paragraph (c)(1) of the Rule; (c) determine that each contract described in
preceding clause (b) (or, in the case of an Eligible Foreign Custodian selected
by BNY which is a Securities Depository, by such a contract, by the rules or
established practices or procedures of the Securities Depository, or by any
combination of the foregoing) shall include the provisions specified in
paragraph (c)(2)(i)(A) through (F) of the Rule or, alternatively, in lieu of any
or all of such (c)(2)(i)(A) through (F) provisions, such other provisions as BNY
determines will provide, in their entirety, the same or a greater level of care
and protection for the assets of the Fund as such specified provisions; (d)
monitor pursuant to the Monitoring System the appropriateness of maintaining the
assets of the Fund with a
2
<PAGE> 3
particular Eligible Foreign Custodian selected by BNY and the contract
governing the arrangement; and (e) advise the Fund whenever an arrangement
described in preceding clause (d) no longer meets the requirements of the Rule
that the Fund must withdraw its assets from such Eligible Foreign Custodian as
soon as reasonably practicable.
2. For purposes of clause (d) of preceding Section 1 of this
Article, appropriateness shall not include, nor be deemed to include, any risks
associated with investment in a particular country. Maintaining assets of the
Fund with an Eligible Foreign Custodian selected by BNY will on any day be
considered appropriate if BNY on such day would select such Eligible Foreign
Custodian in accordance with Articles II and III of this Agreement.
ARTICLE IV
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been
duly authorized, executed and delivered by the Fund, constitutes a valid and
legally binding obligation of the Fund enforceable in accordance with its
terms, and no statute, regulation, rule, order, judgment or contract binding on
the Fund prohibits the Fund's execution or performance of this Agreement; (b)
this Agreement has been approved and ratified by the Board at a meeting duly
called and at which a quorum was at all times present; and (c) the Board has
considered the risks associated with investment in each Specified Country
listed on Schedule 1 and will have considered such risks prior to any
settlement instructions being given to the Custodian with respect to any other
Specified Country.
2. BNY hereby represents that: (a) BNY is duly organized and
existing under the laws of the State of New York, with full power to carry on
its businesses as now conducted, and to enter into this Agreement and to
perform its obligations hereunder; (b) this Agreement has been duly authorized,
executed and delivered by BNY, constitutes a valid and legally binding
obligation of BNY enforceable in accordance with its terms, and no statute,
regulation, rule, order, judgment or contract binding on BNY prohibits BNY's
execution or performance of this Agreement; and (c) BNY has established the
Monitoring System.
ARTICLE V
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys' and accountants' fees, sustained or
incurred by, or asserted against, the Fund except to the extent the same arises
out of the failure of BNY to exercise the care, prudence and diligence required
by Section 2 of Article II hereof. In no event shall BNY be liable to the Fund,
the Board, or any third party for special, indirect or consequential damages,
or for lost profits or loss of business, arising in connection with this
Agreement.
2. The Fund agrees to indemnify BNY and holds it harmless from and
against any and all costs, expenses, damages, liabilities or claims, including
attorneys' and accountants' fees, sustained or incurred by, or asserted against,
BNY by reason or as a result of any action or
3
<PAGE> 4
inaction, or arising out of BNY's performance hereunder, provided that the Fund
shall not indemnify BNY to the extent any such costs, expenses, damages,
liabilities or claims arises out of BNY's failure to exercise the reasonable
care, prudence and diligence required by Section 2 of Article II hereof.
3. BNY shall have only such duties as are expressly set forth herein.
Without limiting the generality of the foregoing, in no event shall BNY be
liable for any risks associated with investments in a particular country, but
shall only be liable for the risks associated in placing assets of the Fund with
a particular Eligible Foreign Custodian selected by BNY.
ARTICLE VI
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and
BNY, and no provision in the Custody Agreement between the Fund and the
Custodian shall affect the duties and obligations of BNY hereunder, nor shall
any provision in this Agreement affect the duties or obligations of the
Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to BNY, shall be sufficiently given if received by
it at its offices at 90 Washington Street, New York, New York 10286, or at such
other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if received
by it at its offices at __________________________________________________ or
at such other place as the Fund may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties. This Agreement shall extend to
and shall be binding upon the parties hereto, and their respective successors
and assigns; provided however, that this Agreement shall not be assignable by
either party without the written consent of the other.
5. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and BNY hereby consent to the jurisdiction of a state or
federal court situated in New York City, New York in connection with any
dispute arising hereunder. The Fund hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection which it may now or hereafter
have to the laying of venue of any such proceeding brought in such a court and
any claim that such proceeding brought in such a court has been brought in an
inconvenient forum. The Fund and BNY each hereby irrevocably waives any and
all rights to trial by jury in any legal proceeding arising out of or relating
to this Agreement.
4
<PAGE> 5
6. The parties hereto agree that in performing hereunder, BNY is
acting solely on behalf of the Fund and no contractual or service relationship
shall be deemed to be established hereby between BNY and any other person.
7. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. This Agreement shall terminate simultaneously with the
termination of the Custody Agreement between the Fund and the Custodian, and
may otherwise be terminated by either party giving to the other party a notice
in writing specifying the date of such termination, which shall be not less
than thirty (30) days after the date of such notice.
9. In consideration of the services provided by BNY hereunder,
the Fund shall pay to BNY such compensation and out-of-pocket expenses as may
be agreed upon from time to time.
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the
date first above written.
EUREKA FUNDS
_______________________________________
BY:
____________________________________
Title:
Tax Identification No.:
THE BANK OF NEW YORK
By:
____________________________________
Title:
5
<PAGE> 6
SCHEDULE 1
Specified Countries
<PAGE> 1
EXHIBIT 9(a)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 1st day of November, 1997, between
______________________ (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES, INC. ("BISYS"), a Delaware corporation having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust (individually referred to herein as a "Fund" and
collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
---------
BISYS shall perform for the Trust the transfer agent services
set forth in Schedule A hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency 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 the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. Fees.
-----
The Trust shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
<PAGE> 2
3. Reimbursement of Expenses.
--------------------------
In addition to paying BISYS the fees described in Section 2
hereof, the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Trust and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Trust, the Trust's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction of
an officer of the Trust thereunto duly authorized.
4. Effective Date.
---------------
This Agreement shall become effective as of the date first
written above (the "Effective Date").
5. Term.
-----
This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
October 31, 1999 (the "Initial Term"). Thereafter, unless otherwise terminated
as provided herein, this Agreement shall be renewed automatically for successive
two-year periods ("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of a notice of nonrenewal in the manner set forth
below, (ii) by mutual agreement of the parties or (iii) for "cause," as defined
below, upon the provision of 60 days advance written notice by the party
alleging cause. Written notice of nonrenewal must be provided within 60 days of
the end of the Initial Term or any Rollover Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its
2
<PAGE> 3
obligations and duties set forth herein; (b) a final, unappealable judicial,
regulatory or administrative ruling or order in which the party to be terminated
has been found guilty of criminal or unethical behavior in the conduct of its
business; or (c) financial difficulties on the part of the party to be
terminated which are evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors.
After such termination, for so long as BISYS, with the written
consent of the Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' cash disbursements in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its distributor or investment adviser and/or other parties, of the
Trust's property, records, instruments and documents, or any copies thereof. To
the extent that BISYS may retain in its possession copies of any Trust documents
or records subsequent to such termination which copies had not been requested by
or on behalf of the Trust in connection with the termination process described
above, BISYS, for a reasonable fee, will provide the Trust with reasonable
access to such copies.
If, for any reason, BISYS is replaced as transfer agent, or if a
third party is added to perform all or a part of the services provided by BISYS
under this Agreement (excluding any sub-transfer agent appointed by BISYS as
provided in Section 1 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages to, BISYS equal to the balance due BISYS for the
remainder of the term of this Agreement, assuming for purposes of calculation of
the payment that the asset level of the Trust on the date BISYS is replaced, or
a third party is added, will remain constant for the balance of the contract
term.
In the event the Trust is merged into another legal entity in
part or in whole or is otherwise liquidated in part or in whole pursuant to a
business reorganization prior to the expiration of the then-current term of this
Agreement, the parties acknowledge and agree that (i) the liquidated damages
provision set forth above shall be applicable in those instances in which BISYS
is not retained by the surviving entity to provide administration services and
(ii) for purposes of calculating the payment amount representing liquidated
damages, the appropriate asset level of the Trust shall be the greater of: (i)
the asset level calculated for the Trust at the time the Trust's Board of
Trustees receives notification of an intention on the part of Fund management to
effect such a business reorganization; (ii) the asset level calculated for the
Trust at the time the Trust's Board of Trustees formally approves such a
business reorganization; or (iii) the asset level calculated for the Trust on
the day prior to the first day during which assets are transferred by the Trust
to the surviving entity
3
<PAGE> 4
pursuant to the plan of reorganization. The one-time cash payment referenced
above shall be due and payable on the day prior to the first day during which
assets are transferred to the surviving entity pursuant to the plan of
reorganization.
The parties further acknowledge and agree that, in the event
BISYS is replaced, or a third party is added, as set forth above, (i) a
determination of actual damages incurred by BISYS would be extremely difficult,
and (ii) the liquidated damages provision contained herein is intended to
adequately compensate BISYS for damages incurred and is not intended to
constitute any form of penalty.
6. Uncontrollable Events.
----------------------
BISYS assumes no responsibility hereunder, and shall not be
liable for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
7. Legal Advice.
-------------
BISYS shall notify the Trust at any time BISYS believes that it
is in need of the advice of counsel (other than counsel in the regular employ of
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Trust, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving BISYS' willful misfeasance, bad faith,
gross negligence or reckless disregard with respect to BISYS' responsibilities
and duties hereunder and BISYS shall in no event be liable to the Trust or any
Fund or any shareholder or beneficial owner of the Trust for any action
reasonably taken pursuant to such advice.
8. Instructions.
-------------
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the Trust
or by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
4
<PAGE> 5
9. Standard of Care; Reliance on Records and Instructions;
-------------------------------------------------------
Indemnification.
----------------
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, 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 BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. Record Retention and Confidentiality.
-------------------------------------
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Trust and to
make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
11. Reports.
--------
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule C attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
C. The Trust agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein not later than three
business days from the receipt
5
<PAGE> 6
thereof. In the event that errors or discrepancies, except such errors and
discrepancies as may not reasonably be expected to be discovered by the
recipient within three days after conducting a diligent examination, are not so
reported within the aforesaid period of time, a report will for all purposes be
accepted by and be binding upon the Trust and any other recipient, and BISYS
shall have no liability for errors or discrepancies therein and shall have no
further responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
12. Rights of Ownership.
--------------------
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
13. Return of Records.
------------------
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and records
will be retained by BISYS for six years from the year of creation. At the end of
such six-year period, such records and documents will be turned over to the
Trust unless the Trust authorizes in writing the destruction of such records and
documents.
14. Bank Accounts.
--------------
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. Representations of the Trust.
-----------------------------
The Trust certifies to BISYS that: (a) as of the close of
business on the Effective Date, each Fund which is in existence as of the
Effective Date has authorized unlimited shares, and (b) by virtue of its
Declaration of Trust, shares of each Fund which are redeemed by the Trust may be
sold by the Trust from its treasury, and (c) this Agreement has been duly
authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency,
6
<PAGE> 7
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
16. Representations of BISYS.
-------------------------
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, substantial compliance with all provisions of law,
including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties under
this Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. Insurance.
----------
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. Information to be Furnished by the Trust and Funds.
---------------------------------------------------
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of
the state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of
Trustees covering the following matters:
A. Approval of this Agreement and authorization
of a specified officer of the Trust to
execute and deliver this Agreement and
authorization for specified officers of the
Trust to instruct BISYS hereunder; and
7
<PAGE> 8
B. Authorization of BISYS to act as Transfer
Agent for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statement of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent (or
as of the date on which BISYS' services are commenced,
whichever is the later date) and as to receipt of full
consideration by the Trust for all shares outstanding,
such statement to be certified by the Treasurer of the
Trust.
19. Information Furnished by BISYS.
-------------------------------
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the
following matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for
the Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad- 13 under the
Exchange Act.
8
<PAGE> 9
20. Amendments to Documents.
------------------------
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
-----------------------
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Trust first obtains
BISYS' written consent to and approval of such amendments or changes.
22. Compliance with Law.
--------------------
Except for the obligations of BISYS set forth in Section 10
hereof, the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
23. Notices.
--------
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
9
<PAGE> 10
24. Headings.
---------
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
-----------
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. Governing Law and Matters Relating to the Trust as a
----------------------------------------------------
Massachusetts Business Trust.
-----------------------------
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the
Trust personally, but shall bind only the trust property of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees,
and this Agreement has been signed and delivered by an authorized officer of the
Trust, acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the Trust's
Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
----------------------------------
By:
------------------------------
BISYS FUND SERVICES, INC.
By:
------------------------------
10
<PAGE> 11
Dated:
------------
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
-------------------------
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
------------------------
1. Shareholder Transactions
------------------------
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
--------------------------------
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
A-1
<PAGE> 12
3. Compliance Reporting
--------------------
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
--------------------------------------
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. Shareholder Account Maintenance
-------------------------------
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE> 13
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
-------------------------
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
-------------------
Annual Per Fund Fee: $15,000
- --------------------
Annual Per Account Fee:
- -----------------------
<TABLE>
<CAPTION>
Retail (Load) Retail (No-Load) Institutional
------------- ---------------- -------------
<S> <C> <C> <C>
Daily Dividend $25.00 $21.00 $17.00
Monthly/Annual Dividend $23.00 $19.00 $15.00
Closed Accounts $12.50 $10.50 $ 8.50
</TABLE>
Additional Services:
- --------------------
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
Multiple Classes of Shares:
- ---------------------------
Classes of shares which have different net asset values or pay
different daily dividends will be treated as separate classes, and the fee
schedule above, including the appropriate minimums, will be charged for each
separate class.
Out-of-pocket Expenses:
- -----------------------
BISYS shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the expenses set forth in
Section 3 of the Transfer Agency Agreement to which this Schedule B is attached.
B-1
<PAGE> 14
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
-------------------------
AND
BISYS FUND SERVICES, INC.
REPORTS
-------
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
C-1
<PAGE> 1
EXHIBIT 9(b)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of November, 1997, between _______________
(the "Trust"), a Massachusetts business trust having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES,
INC. ("Fund Accountant"), a corporation organized under the laws of the State of
Delaware and having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
----------------------------
(a) Maintenance of Books and Records. Fund Accountant
will keep and maintain the following books and
records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record
in detail of all purchases and sales of
securities, all receipts and disbursements
of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income
and expense accounts, including interest
accrued and interest received, as required
by subsection (b)(2)(I) of the Rule;
(iii) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the Rule;
and
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, Fund Accountant shall perform the following
accounting services daily for each Fund:
<PAGE> 2
(i) Calculate the net asset value per share
utilizing prices obtained from the sources
described in subsection 1(b)(ii) below;
(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
each Fund's investment adviser or its
designee, as approved by the Trust's Board
of Trustees;
(iii) Verify and reconcile with the Funds'
custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net
income and capital gains, dividend payables,
dividend factors, 7-day yields, 7-day
effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation
and dividend factor (if any) for each Fund
prior to release to shareholders, check and
confirm the net asset values and dividend
factors for reasonableness and deviations,
and distribute net asset values and yields
to NASDAQ;
(vi) Report to the Trust the daily market pricing
of securities in any money market Funds,
with the comparison to the amortized cost
basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable
net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Trust;
(ix) Update fund accounting system to reflect
rate changes, as received from a Fund's
investment adviser, on variable interest
rate instruments;
(x) Post Fund transactions to appropriate
categories;
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2)
Fund share transactions and (3) income and
expense accounts;
2
<PAGE> 3
(xiii) Provide accounting reports in connection
with the Trust's regular annual audit and
other audits and examinations by regulatory
agencies; and
(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional
special reports upon the request of the
Trust or a Fund's investment adviser, which
may result in an additional charge, the
amount of which shall be agreed upon between
the parties.
(ii) Fund Accountant may provide such other
similar services with respect to a Fund as
may be reasonably requested by the Trust,
which may result in an additional charge,
the amount of which shall be agreed upon
between the parties.
(d) Additional Accounting Services. Fund Accountant shall
also perform the following additional accounting
services for each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the Trust.
The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax returns
and federal excise tax returns;
(B) the Trust's semi-annual reports with
the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and
quarterly (if any) shareholder
reports;
(D) registration statements on Form N-1A
and other filings relating to the
registration of shares;
3
<PAGE> 4
(E) the Administrator's monitoring of
the Trust's status as a regulated
investment company under Subchapter
M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's
auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
---------------
Fund Accountant may, at its expense, subcontract with any
entity or person concerning the provision of the services contemplated
hereunder; provided, however, that Fund Accountant shall not be relieved of any
of its obligations under this Agreement by the appointment of such subcontractor
and provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 7 hereof, for all acts of such subcontractor as if such acts
were its own.
3. Compensation.
-------------
The Trust shall pay Fund Accountant for the services to be
provided by Fund Accountant under this Agreement in accordance with, and in the
manner set forth in, Schedule A hereto, as such Schedule may be amended from
time to time.
4. Reimbursement of Expenses.
--------------------------
In addition to paying Fund Accountant the fees described in
Section 3 hereof, the Trust agrees to reimburse Fund Accountant for its
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
(a) All freight and other delivery and bonding charges incurred by
Fund Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Fund
Accountant in communication with the Trust, the Trust's
investment advisor or custodian, dealers or others as required
for Fund Accountant to perform the services to be provided
hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Trust thereunto duly
authorized; and
(f) Any additional expenses reasonably incurred by Fund Accountant
in the performance of its duties and obligations under this
Agreement.
4
<PAGE> 5
5. Effective Date.
---------------
This Agreement shall become effective with respect to a Fund
as of the date first written above (or, if a particular Fund is not in existence
on that date, on the date such Fund commences operation) (the "Effective Date").
6. Term.
-----
This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until October 31, 1999 (the "Initial Term"). Thereafter, unless otherwise
terminated as provided herein, this Agreement shall be renewed automatically for
successive two-year periods ("Rollover Periods"). This Agreement may be
terminated without penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined below, upon the provision of 60 days advance written notice
by the party alleging cause. Written notice of nonrenewal must be provided
within 60 days of the end of the Initial Term or any Rollover Period, as the
case may be.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; or (c) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors.
After such termination for so long as Fund Accountant, with
the written consent of the Trust, in fact continues to perform any one or more
of the services contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Fund Accountant and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Fund Accountant shall be entitled to collect from the Trust, in
addition to the compensation described under Section 3 hereof, the amount of all
of Fund Accountant's cash disbursements for services in connection with Fund
Accountant's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination, for a reasonable fee, Fund Accountant will provide the
Trust with reasonable access to any Trust documents or records remaining in its
possession.
5
<PAGE> 6
If, for any reason, Fund Accountant is replaced as Fund
Accountant, or if a third party is added to perform all or a part of the
services provided by Fund Accountant under this Agreement (excluding any
sub-accountant appointed by Fund Accountant as provided in Section 2 hereof),
then the Trust shall make a one-time cash payment, as liquidated damages, to
Fund Accountant equal to the balance due Fund Accountant for the remainder of
the term of this Agreement, assuming for purposes of calculation of the payment
that the asset level of the Trust on the date Fund Accountant is replaced, or a
third party is added, will remain constant for the balance of the contract term.
In the event the Trust is merged into another legal entity in
part or in whole or is otherwise liquidated in part or in whole pursuant to a
business reorganization prior to the expiration of the then-current term of this
Agreement, the parties acknowledge and agree that (i) the liquidated damages
provision set forth above shall be applicable in those instances in which Fund
Accountant is not retained by the surviving entity to provide administration
services and (ii) for purposes of calculating the payment amount representing
liquidated damages, the appropriate asset level of the Trust shall be the
greater of: (i) the asset level calculated for the Trust at the time the Trust's
Board of Trustees receives notification of an intention on the part of Fund
management to effect such a business reorganization; (ii) the asset level
calculated for the Trust at the time the Trust's Board of Trustees formally
approves such a business reorganization; or (iii) the asset level calculated for
the Trust on the day prior to the first day during which assets are transferred
by the Trust to the surviving entity pursuant to the plan of reorganization. The
one-time cash payment referenced above shall be due and payable on the day prior
to the first day during which assets are transferred to the surviving entity
pursuant to the plan of reorganization.
The parties further acknowledge and agree that, in the event
Fund Accountant is replaced, or a third party is added, as set forth above, (i)
a determination of actual damages incurred by Fund Accountant would be extremely
difficult, and (ii) the liquidated damages provision contained herein is
intended to adequately compensate Fund Accountant for damages incurred and is
not intended to constitute any form of penalty.
7. Standard of Care; Reliance on Records and Instructions;
-------------------------------------------------------
Indemnification.
----------------
Fund Accountant shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to the Trust for any action taken or omitted by Fund Accountant in the absence
of bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, 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 Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to such Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to such
Fund given or made to Fund Accountant by a duly authorized representative of the
Trust; provided that this indemnification shall not apply to actions or
omissions
6
<PAGE> 7
of Fund Accountant in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties, and
further provided that prior to confessing any claim against it which may be the
subject of this indemnification, Fund Accountant shall give the Trust written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of Fund Accountant.
8. Record Retention and Confidentiality.
-------------------------------------
Fund Accountant shall keep and maintain on behalf of the Trust
all books and records which the Trust and Fund Accountant is, or may be,
required to keep and maintain pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), relating to the
maintenance of books and records in connection with the services to be provided
hereunder. Fund Accountant further agrees that all such books and records shall
be the property of the Trust and to make such books and records available for
inspection by the Trust or by the Securities and Exchange Commission at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Trust and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process.
9. Uncontrollable Events.
----------------------
Fund Accountant assumes no responsibility hereunder, and shall
not be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. Reports.
--------
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Trust agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein no
later than three business days from the receipt thereof. In the event that
errors or discrepancies, except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient within ten days after
conducting a diligent examination, are not so reported within the aforesaid
period of time, a report will for all purposes be accepted by and binding upon
the Trust and any other recipient, and, except as provided in Section 7 hereof,
Fund Accountant shall have no liability for errors or discrepancies therein and
shall have no further responsibility with respect to such report except to
perform reasonable corrections of such errors and discrepancies within a
reasonable time after requested to do so by the Trust.
7
<PAGE> 8
11. Rights of Ownership.
--------------------
All computer programs and procedures developed to perform
services required to be provided by Fund Accountant under this Agreement are the
property of Fund Accountant. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable after termination of this Agreement for any reason.
12. Return of Records.
------------------
Fund Accountant may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Fund Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Trust, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Trust
unless the Trust authorizes in writing the destruction of such records and
documents.
13. Representations of the Trust.
-----------------------------
The Trust certifies to Fund Accountant that: (1) as of the
close of business on the Effective Date, each Fund that is in existence as of
the Effective Date has authorized unlimited shares, and (2) this Agreement has
been duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of Fund Accountant.
-----------------------------------
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
8
<PAGE> 9
15. Insurance.
----------
Fund Accountant shall notify the Trust should any of its
insurance coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. Fund Accountant shall notify the Trust
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. Information to be Furnished by the Trust and Funds.
---------------------------------------------------
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and
of any amendments thereto, certified by the proper
official of the state in which such document has been
filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments
thereto; and
(ii) Certified copies of resolutions of the Board
of Trustees covering the approval of this
Agreement, authorization of a specified
officer of the Trust to execute and deliver
this Agreement and authorization for
specified officers of the Trust to instruct
Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together
with specimen signatures of those officers who are
authorized to instruct Fund Accountant in all
matters.
(d) Two copies of the Prospectuses and Statements of
Additional Information for each Fund.
17. Information Furnished by Fund Accountant.
-----------------------------------------
(a) Fund Accountant has furnished to the Trust the
following:
(i) Fund Accountant's Articles of Incorporation;
and
(ii) Fund Accountant's Bylaws and any amendments
thereto.
(b) Fund Accountant shall, upon request, furnish
certified copies of corporate actions covering the
following matters:
9
<PAGE> 10
(i) Approval of this Agreement, and
authorization of a specified officer of Fund
Accountant to execute and deliver this
Agreement; and
(ii) Authorization of Fund Accountant to act as
fund accountant for the Trust and to provide
accounting services for the Trust.
18. Amendments to Documents.
------------------------
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
19. Compliance with Law.
--------------------
Except for the obligations of Fund Accountant set forth in
Section 8 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to compliance with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
20. Notices.
--------
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
21. Headings.
---------
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
10
<PAGE> 11
22. Assignment.
-----------
This Agreement and the rights and duties hereunder shall not
be assignable with respect to a Fund by either of the parties hereto except by
the specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. Governing Law.
--------------
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
24. Limitation of Liability of the Trustees and Shareholders.
---------------------------------------------------------
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
---------------------------------
By:
-----------------------------
BISYS FUND SERVICES, INC.
By:
-----------------------------
11
<PAGE> 12
Dated: November 1, 1997
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
---------------------------------
AND
BISYS FUND SERVICES, INC.
FEES
----
Fund Accountant shall be entitled to receive a fee in accordance with the
following schedule:
The Trust will pay Fund Accountant on the first business day of each
month, or at such time(s) as Fund Accountant shall request and the
parties hereto shall agree, a fee computed daily at the annual rate set
forth below, subject to the per Fund annual minimum fees set forth on
this Schedule:
Three one-hundredths of one percent (.03%) of the Trust's
average daily net assets up to $500 million.
Two one-hundredths of one percent (.02%) of the Trust's
average daily net assets in excess of $500 million up to $1
billion.
One one-hundredths of one percent (.01%) of the Trust's
average daily net assets in excess of $1 billion.
The fee payable by the Trust hereunder shall be allocated to each Fund
based upon its pro rata share of the total fee payable hereunder. Such
fee as is attributable to each Fund shall be a separate (and not joint
or joint and several) obligation of each such Fund. Fund Accountant may
agree, from time to time, to waive fees payable under this Agreement.
Such waiver shall be at Fund Accountant's sole discretion. The per Fund
annual minimum fees payable by the Trust are set forth below:
Domestic (Taxable) $30,000
Domestic (Tax-Free) $35,000
International/Global $40,000
A-1
<PAGE> 13
With respect to any class of shares (other than Class A Shares or Trust
Shares) that is created after the effective date of this Agreement in a
Fund in existence on the date hereof or in a Fund established after the
date hereof, an additional fee in the amount of $10,000 shall be paid
by such Fund for such class(es).
BISYS FUND SERVICES, INC.
- -------------------------------
By: By:
--------------------------- ---------------------------
A-2
<PAGE> 1
EXHIBIT 9(c)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of November, 1997, by and
between ______________________________, a Massachusetts business trust (the
"Company"), and BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND
SERVICES (the "Administrator"), an Ohio limited partnership.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest ("Shares");
and
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Company as the Company and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. Retention of the Administrator. The Company hereby retains
the Administrator to act as the administrator of the Portfolios and to furnish
the Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Company in any way and shall
not be deemed an agent of the Company.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Company,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Trustees of the Company with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Company with regulatory reporting,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Trustees' meetings) for handling the
affairs of the Portfolios and such other services as the Administrator shall,
from time to time, determine to be necessary to perform its obligations under
<PAGE> 2
this Agreement. In addition, at the request of the Board of Trustees, the
Administrator shall make reports to the Company's Trustees concerning the
performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Company expenses and control all
disbursements for the Company, and as appropriate compute the
Company's yields, total return, expense ratios, portfolio,
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the
Company's Shares with state securities authorities, monitor
the sale of Company Shares for compliance with state
securities laws, and file with the appropriate state
securities authorities the registration statements and reports
for the Company and the Company's Shares and all amendments
thereto, as may be necessary or convenient to register and
keep effective the Company and the Company's Shares with state
securities authorities to enable the Company to make a
continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's
investment adviser, communications to Shareholders, including
the annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Company Shareholders, and supervise and facilitate
the proxy solicitation process for all shareholder meetings,
including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among
others, the Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination
to information services covering the investment company
industry;
(h) coordinate and supervise the preparation and filing of the
Company's tax returns;
2
<PAGE> 3
(i) examine and review the operations and performance of the
various organizations providing services to the Company or any
Portfolio of the Company, including, without limitation, the
Company's investment adviser, distributor, custodian, fund
accountant, transfer agent, outside legal counsel and
independent public accountants, and at the request of the
Board of Trustees, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of the Company's semi-annual and annual reports to
Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to the Company's
Board of Trustees to serve as officers of the Company, who
will be responsible for the management of certain of the
Company's affairs as determined by the Company's Board of
Trustees;
(m) advise the Company and its Board of Trustees on matters
concerning the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the
Company in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Company's Board of Trustees;
(o) monitor and advise the Company and its Portfolios on their
registered investment company status under the Internal
Revenue Code of 1986, as amended;
(p) perform all administrative services and functions of the
Company and each Portfolio to the extent administrative
services and functions are not provided to the Company or such
Portfolio pursuant to the Company's or such Portfolio's
investment advisory agreement, distribution agreement,
custodian agreement, transfer agent agreement and fund
accounting agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Company and the Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the
Company on Form N-SAR and all required notices pursuant to
Rule 24f-2.
3
<PAGE> 4
The Administrator shall perform such other services for the Company
that are mutually agreed upon by the parties from time to time. Such services
may include performing internal audit examinations; mailing the annual reports
of the Portfolios; preparing an annual list of Shareholders; and mailing notices
of Shareholders' meetings, proxies and proxy statements, for all of which the
Company will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all Trustees of the
Company who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Trustees of the
Company to perform services on behalf of the Company.
(B) The Company. The Company assumes and shall pay or cause to be paid
all other expenses of the Company not otherwise allocated herein, including,
without limitation, organization costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not affiliated persons of the Administrator or the Investment Adviser to
the Company or any affiliated corporation of the Administrator or the Investment
Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Company.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Company shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Company
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first
day of a month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the
4
<PAGE> 5
calculation of the fees as set forth above. Payment of the Administrator's
compensation for the preceding month shall be made promptly.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. 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. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. (As used in this Article 5, the term "Administrator" shall include
partners, officers, employees and other agents of the Administrator as well as
the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Company assumes full responsibility and shall
indemnify the Administrator and hold it harmless from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and against
any and all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of the
Administrator's actions taken or nonactions with respect to the performance of
services hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Company may be asked to indemnify or hold the
Administrator harmless, the Company shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Company promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Company, but failure to do so in good faith shall not affect the rights
hereunder.
The Company shall be entitled to participate at its own expense or, if
it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Company elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
Company and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Company elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Company does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
5
<PAGE> 6
The Administrator may apply to the Company at any time for instructions
and may consult counsel for the Company or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Company until receipt of written notice thereof from the Company.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders of the Company are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Company, and that the Administrator may be or become
interested in the Company as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Trustees of the Company, and (ii) by the vote of a majority of
the Trustees of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Trustees meeting called
for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Company does not conflict with or violate any requirements of
its Declaration of Trust or then current prospectuses, or any rule, regulation
or requirement of any regulatory body.
6
<PAGE> 7
ARTICLE 10. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Company has agreed to indemnify the Administrator against such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Company, at 3435 Stelzer Road, Columbus, Ohio 43219,
Attention: ____________________; and if to the Administrator at 3435 Stelzer
Road, Columbus, Ohio 43219, Attention: George O. Martinez, Esq.
ARTICLE 13. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 15. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Company hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Company personally, but shall bind only the trust property of
the Company. The execution and delivery of this Agreement have been authorized
by the Trustees, and this Agreement has been signed and delivered by an
authorized officer of the Company, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them
7
<PAGE> 8
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Company as provided in the Company's
Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
---------------------------------
By:
-----------------------------
Title:
--------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
BY: BISYS FUND SERVICES, INC.,
GENERAL PARTNER
By:
-----------------------------
Title:
--------------------------
8
<PAGE> 9
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF NOVEMBER 1, 1997
BETWEEN _______________________
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios of the Company,
either now or hereafter created. The current Portfolios of the
Company are set forth below:
__________ Prime Money Market Fund
__________ U.S. Treasury Money Market Fund
__________ Intermediate Bond Fund
__________ Global Asset Allocation Fund
__________ Quant Fund
Fees: Pursuant to Article 4, in consideration of services rendered
and expenses assumed pursuant to this Agreement, the Company
will pay the Administrator on the first business day of each
month, or at such time(s) as the Administrator shall request
and the parties hereto shall agree, a fee computed daily at
the annual rate set forth below, subject to a per Portfolio
annual minimum fee of $75,000:
Twenty one-hundredths of one percent
(.20%) of the Company's average daily
net assets up to $500 million
Eighteen and one-half one-hundredths
of one percent (.185%) of the
Company's average daily net assets in
excess of $500 million up to $1
billion.
Seventeen and one-half one-hundredths
of one percent (.175%) of the
Company's average daily net assets in
excess of $1 billion.
The fee for the period from the day of the month this
Agreement is entered into until the end of that month shall be
prorated 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 prorated according to the
A-1
<PAGE> 10
proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this
Agreement.
For the purpose of determining fees payable to the
Administrator, the value of the net assets of a particular
Fund shall be computed in the manner described in the Fund's
Declaration of Trust or in the Prospectus or Statement of
Additional Information respecting that Fund as from time to
time is in effect for the computation of the value of such net
assets in connection with the determination of the liquidating
value of the shares of such Fund.
The parties hereby confirm that the fees payable hereunder
shall be applied to each Portfolio as a whole, and not to
separate classes of shares within the Portfolios. The parties
further confirm that the fee schedule set forth above is based
upon the class structure in place as of the date of
commencement of this Agreement. The parties agree and
acknowledge that an additional fee of $10,000 per year shall
be payable hereunder for each new class of shares that is
created after such commencement date.
The fee payable by the Company hereunder shall be allocated to
each Portfolio based upon its pro rata share of the total fee
payable hereunder. Such fee as is attributable to each
Portfolio shall be a separate (and not joint or joint and
several) obligation of each such Portfolio. The Administrator
may agree, from time to time, to waive any fees payable under
this Agreement. Such waiver shall be at the Administrator's
sole discretion.
Term: Pursuant to Article 7, the term of this Agreement shall
commence on November 1, 1997 and shall remain in effect
through October 31, 1999 ("Initial Term"). Thereafter, unless
otherwise terminated as provided herein, this Agreement shall
be renewed automatically for successive two-year periods
("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the
parties or (iii) for "cause," as defined below, upon the
provision of 60 days advance written notice by the party
alleging cause. Written notice of nonrenewal must be provided
within 60 days of the end of the Initial Term or any Rollover
Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard
on the part of the party to be terminated with respect to its
obligations and duties set forth herein; (b) a final,
unappealable judicial, regulatory or administrative ruling or
order in which the party to be terminated has been found
guilty of criminal or unethical behavior in the conduct of its
business; or (c) financial difficulties on the part of the
party to be terminated which are evidenced by the
authorization or commencement of, or involvement by way of
pleading, answer, consent or acquiescence in, a voluntary or
involuntary case
A-2
<PAGE> 11
under Title 11 of the United States Code, as from time to time
is in effect, or any applicable law, other than said Title 11,
of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration
of the rights of creditors.
Notwithstanding the foregoing, after such termination for so
long as the Administrator, with the written consent of the
Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including
without limitation the provisions dealing with
indemnification, shall continue in full force and effect.
Compensation due the Administrator and unpaid by the Company
upon such termination shall be immediately due and payable
upon and notwithstanding such termination. The Administrator
shall be entitled to collect from the Company, in addition to
the compensation described in this Schedule A, the amount of
all of the Administrator's cash disbursements for services in
connection with the Administrator's activities in effecting
such termination, including without limitation, the delivery
to the Company and/or its designees of the Company's property,
records, instruments and documents, or any copies thereof.
Subsequent to such termination, for a reasonable fee, the
Administrator will provide the Company with reasonable access
to any Company documents or records remaining in its
possession.
If, for any reason, the Administrator is replaced as fund
manager and administrator, or if a third party is added to
perform all or a part of the services provided by the
Administrator under this Agreement (excluding any
sub-administrator appointed by the Administrator as provided
in Article 7 hereof), then the Company shall make a one-time
cash payment, as liquidated damages, to the Administrator
equal to the balance due the Administrator for the remainder
of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Company
on the date the Administrator is replaced, or a third party is
added, will remain constant for the balance of the contract
term.
In the event the Company is merged into another legal entity
in part or in whole or is otherwise liquidated in part or in
whole pursuant to a business reorganization prior to the
expiration of the then-current term of this Agreement, the
parties acknowledge and agree that (i) the liquidated damages
provision set forth above shall be applicable in those
instances in which the Administrator is not retained by the
surviving entity to provide administration services and (ii)
for purposes of calculating the payment amount representing
liquidated damages, the appropriate asset level of the Company
shall be the greater of: (i) the asset level calculated for
the Company at the time the Company's Board of Trustees
receives notification of an intention on the part of Fund
management to effect such a business reorganization; (ii) the
asset level calculated for the Company at the time the
Company's Board of Trustees formally approves such a business
reorganization; or (iii) the asset level calculated for the
A-3
<PAGE> 12
Company on the day prior to the first day during which assets
are transferred by the Company to the surviving entity
pursuant to the plan of reorganization. The one-time cash
payment referenced above shall be due and payable on the day
prior to the first day during which assets are transferred to
the surviving entity pursuant to the plan of reorganization.
The parties further acknowledge and agree that, in the event
the Administrator is replaced, or a third party is added, as
set forth above, (i) a determination of actual damages
incurred by the Administrator would be extremely difficult,
and (ii) the liquidated damages provision contained herein is
intended to adequately compensate the Administrator for
damages incurred and is not intended to constitute any form of
penalty.
A-4
<PAGE> 1
EXHIBIT 9(d)
EUREKA FUNDS
SERVICE PLAN
This Service Plan (the "Plan") is adopted by the Eureka Funds, a
business trust organized under the laws of the Commonwealth of Massachusetts
(the "Trust"), on behalf of each of its Funds (individually, a "Fund," and
collectively, the "Funds") set forth in Schedule I, as amended from time to
time, subject to the following terms and conditions:
SECTION 1. ANNUAL FEES.
Service Fee. Each Fund (or class thereof, as the case may be) may pay
to the distributor of its shares (the "Distributor") or financial institutions
that provide certain services to the Funds, a service fee under the Plan at an
annual rate not to exceed 0.25% of the average daily net assets of the Fund or
Class attributable to the Distributor or financial institution thereof (the
"Service Fee").
Adjustment to Fees. Any Fund may pay a Service Fee to the Distributor
or financial institution at a lesser rate than the fees specified in Section 1
hereof as agreed upon by the Board of Trustees and the Distributor or financial
institution and approved in the manner specified in Section 3 of this Plan.
Payment of Fees. The Service Fee will be calculated daily and paid
monthly by each Fund at the annual rates indicated above.
SECTION 2. EXPENSES COVERED BY THE PLAN.
Service Fees may be used by the Distributor or financial institution
for payments to financial institutions and persons who provide administrative
and support services to their customers who may from time to time beneficially
own shares, which may include (i) establishing and maintaining accounts and
records relating to shareholders; (ii) processing dividend and distribution
payments from the Fund on behalf of shareholders; (iii) periodically providing
information to shareholders showing their positions in shares and integrating
such statements with those of other transactions and balances in shareholders'
other accounts serviced by such financial institution; (iv) arranging for bank
wires; (v) responding to shareholder inquiries relating to the services
performed; (vi) responding to routine inquiries from shareholders concerning
their investments; (vii) providing subaccounting with respect to shares
beneficially owned by shareholders, or the information to the Fund necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from the Fund (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to
shareholders; (ix) assisting in processing purchase,
<PAGE> 2
exchange and redemption requests from shareholders and in placing such orders
with the Funds' service contractors; (x) assisting shareholders in changing
dividend options, account designations and addresses; (xi) providing
shareholders with a service that invests the assets of their accounts in shares
pursuant to specific or pre-authorized instructions; and (xii) providing such
other similar services as the Fund may reasonably request to the extent the
Distributor or financial institution is permitted to do so under applicable
statutes, rules and regulations. Notwithstanding the foregoing, no Service Fees
may be used by the Distributor or financial institution for payments for any
activity by any person which is primarily intended to result in the sale of
shares of any Fund.
SECTION 3. APPROVAL OF TRUSTEES.
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board of Trustees of the Trust and
(b) those Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan and the related agreements.
SECTION 4. CONTINUANCE OF THE PLAN.
The Plan will continue in effect until _________________, and
thereafter for successive twelve-month periods, provided, however, that such
continuance is specifically approved at least annually by the Trustees of the
affected Fund and by a majority of the Qualified Trustees.
SECTION 5. TERMINATION.
The Plan may be terminated at any time with respect to a Fund (i) by
the Trust without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund (or, the shareholders of a particular
class, if applicable) or (ii) by a vote of the Qualified Trustees. The Plan may
remain in effect with respect to a Fund even if the Plan has been terminated in
accordance with this Section 5 with respect to any other Fund.
SECTION 6. AMENDMENTS.
No material amendment to the Plan may be made unless approved by the
Trust's Board of Trustees in the manner described in Section 3 above.
SECTION 7. SELECTION OF CERTAIN TRUSTEES.
While the Plan is in effect, the selection and nomination of the
Trust's Trustees who are not interested persons of the Fund will be committed to
the discretion of the Trustees then in office who are not interested persons of
the Trust.
-2-
<PAGE> 3
SECTION 8. WRITTEN REPORTS.
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by a Fund
pursuant to the Plan or any related agreement will prepare and furnish to the
Trust's Board of Trustees, and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule which set out the
amounts expended under the Plan and the purposes for which those expenditures
were made.
SECTION 9. PRESERVATION OF MATERIALS.
The Trust will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 8 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.
SECTION 10. LIMIT OF LIABILITY.
The limitation of shareholder liability set forth in the Trust's
Declaration of Trust is hereby acknowledged. The obligations of the Trust under
this Plan, if any, shall not be binding upon the Trustees individually or upon
holders of shares of the Trust individually but shall be binding only upon the
assets and property of the Trust, and upon the Trustees insofar as they hold
title thereto.
SECTION 11. MEANINGS OF CERTAIN TERMS.
As used in the 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 Investment Company Act of 1940.
IN WITNESS WHEREOF, the Trust executed this Plan as of _______________.
Eureka Funds
By:
---------------------
President
-3-
<PAGE> 4
SCHEDULE I
This Service Plan shall be adopted with respect to the following Funds
(and Classes) of the Eureka Funds:
Name of Fund Class
- ------------ -----
Eureka Prime Money Market Fund Class A
Eureka U.S. Treasury Obligations Fund Class A
Eureka Investment Grade Bond Fund Class A
Eureka Global Asset Allocation Fund Class A
Eureka Equity Fund Class A
-4-
<PAGE> 1
EXHIBIT 9(e)
SERVICE AGREEMENT
Dated as of _____________
3435 Stelzer Road
Columbus, Ohio 43219-3035
Ladies and Gentlemen:
We wish to enter into an Agreement with you to service shareholders of,
and administer shareholder accounts in, ____________________ (the "Trust"), an
open-end investment company registered under the Investment Company Act of 1940
(the "Act") which has _____________________ or more separate investment
portfolios: ___________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________,
together with any future investment portfolios that may be added as a series of
the Trust.
The terms and conditions of this Agreement are as follows:
1. We shall provide shareholder and administrative services for
shareholders of the Trust who are also our clients ("clients"), which services
may include, without limitation and to the extent we are permitted by applicable
statute, rule or regulation: (a) providing necessary personnel and facilities to
establish and maintain certain shareholder accounts and records, as requested
from time to time by the Trust; (b) assisting in processing purchase and
redemption transactions; (c) arranging for the wiring of funds; (d) transmitting
and receiving funds in connection with client orders to purchase or redeem Trust
shares; (e) verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in client-designated accounts;
(f) providing periodic statements showing a client's account balances and, to
the extent practicable, integrating such information with other client
transactions otherwise effected with or through us; (g) furnishing (either
separately or on an integrated basis with other reports sent to a client by us)
periodic and annual statements and confirmations of all purchases and
redemptions of Trust shares in a client's account; (h) transmitting proxy
statements, annual reports, and updating prospectuses and other communications
from the Trust to clients; and (i) such other services as the Trust or a client
reasonably may request. We shall provide such office space and equipment,
telephone facilities and personnel (which may be all or any part of the space,
equipment and facilities currently used in our
<PAGE> 2
business, or all or any personnel employed by us) as is necessary or beneficial
for providing information and services to shareholders of the Trust.
2. Neither we nor any of our employees or agents shall be authorized to
make any representation concerning shares of the Trust except those contained in
the then current Prospectuses for the Trust, copies of which will be supplied by
you to us; and we shall have no authority to act as agent for the Trust.
3. In consideration of the services and facilities described herein, we
shall be entitled to receive from you fees to be paid periodically (but in no
event less frequently than semiannually) as set forth in Schedule A attached
hereto; provided that such fees shall not exceed during any period the amount
payable at an annual rate of ____% of the average daily net assets of the Trust
represented by shares owned by clients with whom we maintain a servicing
relationship.
It is agreed that we may impose certain conditions on clients,
in addition to or different from those imposed by the Trust, such as requiring a
minimum initial investment or charging clients direct fees for the same or
similar services as are provided hereunder by us as agent (which fees either may
relate specifically to our services with respect to the Trust or generally over
services not limited to those with respect to the Trust). We shall bill clients
directly for such fees. In the event we charge clients such fees, to the extent
permissible by applicable statues, rules and regulations, we shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to clients both of any direct fees charged to clients and
of the fees received or to be received by us from the Trust pursuant to this
Agreement. It is understood, however, that in no event shall we have recourse or
access to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Trust, for payment of any direct fees referred to in this Agreement.
4. To the extent requested by the Trust from time to time, we agree
that we will provide the Treasurer of the Trust with a written report of the
amounts expended by us and the purposes for which such expenditures were made.
Such written reports shall be in a form satisfactory to the Trust and shall
supply all information necessary for the Trust to discharge its responsibilities
under applicable laws and regulations.
5. We shall maintain records in a form acceptable to you and in
compliance with applicable laws and the rules and regulations of the Securities
and Exchange Commission including, but not limited to, the record-keeping
requirements of Section 31(a) of the Act and the rules thereunder. Such records
shall be deemed to be the property of the Trust and will be made available, at
the Trust's request, for inspection and use by the Trust, representatives of the
Trust and governmental bodies. We agreed that, for so long as we retain any
records of the Trust, we will meet all reporting requirements pursuant to the
Act with respect to such records.
2
<PAGE> 3
6. We shall maintain accurate and complete records with respect to
services performed by us in connection with the purchase and redemption of
shares. Such records shall be maintained in a form satisfactory to you and in
compliance with the requirements of Rules 17a-3 and 17a-4 under the Securities
Exchange Act of 1934, as amended, pursuant to which any dealer of the shares
must maintain certain records. All such records maintained by us shall be the
property of such dealer and will be made available for inspection and use by you
or such dealer upon the request of either. We shall file, and furnish to you and
any such dealer, copies of all reports and undertakings required by the
Securities and Exchange Commission pertaining to the above transactions in
compliance with the said rules. If so requested by any such dealer, we shall
confirm to such dealer its obligations under this paragraph by a writing
reasonably satisfactory to such dealer. The Trust shall specify to us, as we
shall periodically review with the Trust, the records to be maintained and the
procedures to be followed by us in complying with this paragraph.
7. The Trust will indemnify and hold us harmless from all losses,
claims, damages, liabilities or expenses from any claim, demand, action or suit
(collectively, "Claims") (a) arising in connection with misstatements or
omissions in the Trust's Prospectuses, actions or inactions by the Trust or any
of its agents or contractors or the performance of our obligations hereunder and
(b) not resulting from (i) our bad faith or negligence, or that of our officers,
employees or agents, or (ii) our breach of applicable law, or any breach by our
officers, employees or agents, or (iii) our actions or those of our officers,
employees or agents which exceed our legal authority or our authority hereunder,
or (iv) any error or omission committed by us, our officers, employees or agents
with respect to the purchase, redemption and transfer of clients' shares or our
verification or guarantee of any client signature. Notwithstanding anything
herein to the contrary, you will indemnify and hold us harmless from any and all
losses, claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any Claim as a result of our acting in
accordance with any written instructions reasonably believed by us to have been
executed by any person duly authorized by the Trust, or as a result of acting in
reliance upon any instrument or stock certificate signed, countersigned or
executed by a person duly authorized by the Trust, excepting only our negligence
or bad faith.
In any case in which you may be asked to indemnify or hold us
harmless, you shall be advised of all pertinent facts concerning the situation
in question and we shall use reasonable care to identify and notify you promptly
concerning any situation which presents or appears likely to present a claim for
indemnification against you. You shall have the option to defend us against any
Claim which may be the subject of indemnification hereunder. In the event that
you elect to defend against such Claim, the defense shall be conducted by
counsel chosen by you and satisfactory to us. We may retain additional counsel
at our expense. Except with your prior written consent, we shall not confess any
Claim or make any compromise in any case in which you will be asked to indemnify
us.
8. Without limiting your rights under applicable law, we will indemnify
and hold you harmless from all Claims (a) resulting from (i) our bad faith or
negligence, or that of our officers,
3
<PAGE> 4
employees or agents, or (ii) our breach of applicable law, or any breach by our
officers, employees or agents, or (iii) our actions or those of our officers,
employees or agents which exceed our legal authority or our authority hereunder,
or (iv) any error or omission committed by us, our officers, employees or agents
with respect to the purchase, redemption and transfer of clients' shares or our
verification or guarantee of any client signature, and (b) not resulting from
actions in accordance with written instructions reasonably believed by us to
have been executed by any person duly authorized by the Trust or in reliance
upon any instrument or stock certificate reasonably believed by us to have been
genuine and signed, countersigned or executed by a person duly authorized by the
Trust.
In any case in which we may be asked to indemnify or hold the
Trust harmless, we shall be advised of all pertinent facts concerning the
situation in question and the Trust shall use reasonable care to identify and
notify us promptly concerning any situation which presents or appears likely to
present a claim for indemnification against us. We shall have the option to
defend the Trust against any Claim which may be the subject of indemnification
hereunder. In the event that we elect to defend against such Claim, the defense
shall be conducted by counsel chosen by us and satisfactory to the Trust. The
Trust may retain additional counsel at its expense. Except with our prior
written consent, the Trust shall not confess any Claim or make any compromise in
any case in which we will be asked to indemnify the Trust. The indemnities
granted by the parties in this Agreement shall survive the termination of this
Agreement.
9. This Agreement may be terminated by the Trust, without the payment
of any penalty, at any time upon not more than 60 days' nor less than 30 days'
notice, by a vote of a majority of the Board of Trustees who are not "interested
persons" of the Trust (as defined in the Act) or by "a vote of a majority of the
outstanding voting securities" (as defined in the Act) of the Trust. We may
terminate this Agreement upon not more than 60 days' nor less than 30 days'
notice to the Trust. Notwithstanding anything herein to the contrary, this
Agreement may not be assigned and shall terminate automatically without notice
to either party upon any assignment. Upon termination hereof, the Trust shall
pay such compensation as may be due us as of the date of such termination.
10. Our appointment as shareholder servicing agent hereunder is
nonexclusive, and the parties hereto recognize and agree that, from time to
time, the Trust may enter into other shareholder servicing agreements, in
writing, with other financial institutions.
11. The Declaration of Trust establishing the Trust, filed on ________,
a copy of which, together with all amendments thereto (the "Declaration"), is on
file in the Office of the Secretary of the ____________________________,
provides that the name of the Trust refers to the trustees under the Declaration
collectively as trustees and not as individuals or personally, and that no
shareholder, trustee, officer, employee or agent of the Trust shall be subject
to claims against or obligations of the Trust to any extent whatsoever, but that
the Trust estate only shall be liable.
4
<PAGE> 5
12. This Agreement may be changed or amended only by written instrument
signed by both parties.
13. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of ________________. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
Very truly yours,
-------------------------------
-------------------------------
-------------------------------
By:
----------------------------
Name:
Title:
NOTE: Please return both signed copies of this Agreement to _________________.
Upon acceptance, one countersigned copy will be returned for your files.
Accepted:
- ---------------------------
By:
------------------------
5
<PAGE> 6
[BISYS LOGO]
BISYS FUND SERVICES LIMITED PARTNERSHIP, DISTRIBUTOR
3435 Stelzer Road
Columbus, Ohio 43219-3035
DEALER AGREEMENT
Ladies and Gentlemen:
As the principal underwriter of the shares ("Shares") of each investment company
portfolio ("Fund") listed in Exhibit A attached hereto, which may be amended
from time to time, BISYS Fund Services Limited Partnership ("BISYS") hereby
agrees with you as follows:
1. You hereby represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and that you
are a broker-dealer properly registered and qualified under all
applicable federal, state and local laws to engage in the business and
transactions described in this Agreement. You also represent that you
are a member in good standing of the Securities Investor Protection
Corporation ("SIPC"). We both agree to abide by the Rules of Fair
Practice of the NASD and all applicable laws, rules and regulations,
including applicable federal and state securities laws, rules and
regulations that are now or may become applicable to transactions
hereunder. You agree that it is your responsibility to determine the
suitability of any Fund Shares as investments for your customers, and
that BISYS has no responsibility for such determination. You further
agree to maintain all records required by applicable law or otherwise
reasonably requested by BISYS relating to Fund transactions that you
have executed. In addition, you agree to notify us immediately in the
event your status as a SIPC member changes.
2. We have furnished you with a list of the states or other jurisdictions
in which Fund Shares have been registered for sale or are otherwise
qualified for sale. Such list appears in Exhibit B attached hereto.
Shares of the Funds may from time to time be registered or otherwise
qualified for sale in states or jurisdictions other than those listed
in Exhibit B. Those states or jurisdictions are incorporated into
Exhibit B by reference. You agree to indemnify us and/or the Funds for
any claim, liability, expense or loss in any way arising out of a sale
of Shares in any state or jurisdiction in which such Shares are not so
registered or qualified for sale.
3. In all sales of Fund Shares, you shall act as agent for your customers
or as principal for your own bona fide investment. In no transaction
shall you act as our agent or as agent for any Fund or the Funds'
Transfer Agent. As agent for your customers, you are hereby authorized
to: (i) place orders directly with the investment company (the
"Company") for the purchase of Shares and (ii) tender Shares to the
Company for redemption, in each case subject to the terms and
conditions set forth in the applicable prospectus ("Prospectus") and
the operating procedures and policies established by us. The minimum
dollar purchase of Shares shall be the applicable minimum amount set
forth in the applicable Prospectus, and no order for less than such
amount shall be accepted by you. The procedures relating to the
handling of orders shall be subject to instructions which we shall
forward to you from time to time. All orders are subject to acceptance
or rejection by BISYS in its sole discretion. No person is authorized
to make any representations concerning Shares of any Fund except such
representations
<PAGE> 7
contained in the relevant then-current Prospectus and statement of
additional information ("Statement of Additional Information") and in
such supplemental information that may be supplied to you by us for a
Fund. If you should make such an unauthorized representation, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation. You are specifically authorized to
distribute the Prospectus and Statement of Additional Information and
sales material received from us. No person is authorized to distribute
any other sales material relating to a Fund without our prior written
approval. You further agree to deliver, upon our request, copies of any
relevant amended Prospectus and Statement of Additional Information to
shareholders of the Fund to whom you have sold Shares. As agent for
your customers, you shall not withhold placing customers' orders for
any Shares so as to profit yourself as a result of such withholding and
shall not purchase any Shares from us except for the purpose of
covering purchase orders already received.
If any Shares purchased by you are repurchased by a Fund or by us for
the account of a Fund, or are tendered for redemption within seven
business days after confirmation by us of the original purchase order
for such Shares, (i) you agree forthwith to refund to us the full
concession allowed to you on the original sale and (ii) we shall
forthwith pay to such Fund that part of the discount retained by us on
the original sale. Notice will be given to you of any such repurchase
or redemption within ten days of the date on which the tender of Shares
for redemption is delivered to us or to the Fund. Neither party to this
Agreement shall purchase any Shares from a record holder at a price
lower than the net asset value next computed by or for the issuer
thereof. Nothing in this subparagraph shall prevent you from selling
Shares for the account of a record holder to us or the issuer and
charging the investor a fair commission for handling the transaction.
Any order placed by you for the repurchase of Shares of a Fund is
subject to the timely receipt by the Company of all required documents
in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation,
in which case you agree to be responsible for any loss resulting to the
Fund or to us from such cancellation.
4. We will furnish you, upon request, with offering prices for the Shares
in accordance with the then- current Prospectuses for the Funds, and
you agree to quote such prices subject to confirmation by us on any
Shares offered to you for sale. The public offering price shall equal
the net asset value per Share of a Fund plus a front-end sales load, if
applicable. For Funds with a front-end sales load, you will receive a
discount from the public offering price as outlined in the current
Prospectus. For Funds with a contingent deferred sales load, you will
receive from us, or a paying agent appointed by us, a commission in the
amount shown in Exhibit C. We reserve the right to waive sales charges.
Each price is always subject to confirmation, and will be based upon
the net asset value next computed after receipt by us of an order that
is in good form. You acknowledge that it is your responsibility to date
and time stamp all orders received by you and to transmit such orders
promptly to us. You further acknowledge that any failure to promptly
transmit such orders to us that causes a purchaser of Shares to be
disadvantaged, based upon the pricing requirements of Rule 22c-1 under
the 1940 Act, shall be your sole responsibility. We reserve the right
to cancel this Agreement at any time without notice if any Shares shall
be offered for sale by you at less than the then-current offering price
determined by or for the applicable Fund.
5. Your customer will be entitled to a front-end sales load reduction with
respect to purchases made under a letter of intent ("Letter of Intent")
or right of accumulation ("Right of Accumulation") described in the
Prospectuses. In such case, your dealer's concession will be based upon
such reduced sales load; however, in the case of a Letter of Intent
signed by your customer, an adjustment to a higher dealer's concession
will thereafter be made to reflect
2
<PAGE> 8
actual purchases by your customer if he or she should fail to fulfill
the Letter of Intent. Your customer will be entitled to an additional
front-end sales load reduction in those instances in which the customer
makes purchases that exceed the dollar amount indicated in the Letter
of Intent and qualifies for an additional front-end sales load
reduction pursuant to the appropriate Prospectus. In such case, your
dealer's concession will be reduced to reflect such additional sales
load reduction. When placing wire trades, you agree to advise us of any
Letter of Intent signed by your customer or of any Right of
Accumulation available to such customer of which he or she has made you
aware. If you fail to so advise us, you will be liable for the return
of any commissions plus interest thereon.
6. With respect to orders that are placed for the purchase of Fund Shares,
unless otherwise agreed, settlement shall be made with the Company
within three (3) business days after our acceptance of the order. If
payment is not so received or made, we reserve the right to cancel the
sale, or, at our option, to sell the Shares to the Funds at the then
prevailing net asset value. In this event or in the event that you
cancel the trade for any reason, you agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments
as aforesaid. You shall not be entitled to any gains generated thereby.
7. You shall be responsible for the accuracy, timeliness and completeness
of any orders transmitted by you on behalf of your customers by wire or
telephone for purchases, exchanges or redemptions, and shall indemnify
us against any claims by your customers as a result of your failure to
properly transmit their instructions. In addition, you agree to
guarantee the signatures of your customers when such guarantee is
required by the Prospectus of a Fund. In that connection, you agree to
indemnify and hold harmless all persons, including us and the Funds'
Transfer Agent, against any and all loss, cost, damage or expense
suffered or incurred in reliance upon such signature guarantee.
8. No advertisement or sales literature with respect to a Fund (as such
terms are defined in the NASD's Rules of Fair Practice) shall be used
by you without first having obtained our approval.
9. Neither of us shall be liable to the other except for (1) acts or
failures to act which constitute a lack of good faith or negligence and
(2) obligations expressly assumed under this Agreement. In addition,
you agree to indemnify us and hold us harmless from any claims or
assertions relating to the lawfulness of your participation in this
Agreement and the transactions contemplated hereby or relating to any
activities of any persons or entities affiliated with your organization
which are performed in connection with the discharge of your
responsibilities under this Agreement. If such claims are asserted, we
shall have the right to manage our own defense, including the selection
and engagement of legal counsel, and all costs of such defense shall be
borne by you.
10. This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by either of us, without
penalty, upon ten days' prior written notice to the other party. This
Agreement may also be terminated at any time without penalty by the
vote of a majority of the members of a Fund's Board of Trustees who are
not "interested persons" (as such term is defined in the 1940 Act), or
(with respect to a Fund) by a vote of a majority of the outstanding
voting securities of that Fund on ten days' written notice.
11. All communications to us shall be sent to the address set forth on page
1 hereof or at such other address as we may designate in writing. Any
notice to you shall be duly given if mailed or telecopied to you at the
address set forth below or at such other address as you may provide in
writing.
3
<PAGE> 9
------------------------------------------
------------------------------------------
------------------------------------------
12. You hereby represent that all requisite corporate proceedings have been
undertaken to authorize you to enter into this Agreement and to perform
the services contemplated herein. You further represent that the
individual that has signed this Agreement below is a duly elected
officer that has been empowered to act for and on behalf of your
organization with respect to the execution of this Agreement.
13. This Agreement supersedes any other agreement between us with respect
to the offer and sale of Shares and relating to any other matters
discussed herein. All covenants, agreements, representations and
warranties made herein shall be deemed to have been material and relied
on by each party. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any
other term or provision thereof. This Agreement may be executed in any
number of counterparts, which together shall constitute one instrument,
and shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of the State of Ohio and shall
bind and insure to the benefit of the parties hereto and their
respective successors and assigns.
If the foregoing corresponds with your understanding of our agreement, please
sign this document and the accompanying copies thereof in the appropriate space
below and return the same to us, whereupon this Agreement shall be binding upon
each of us, effective as of the date of execution.
BISYS FUND SERVICES LIMITED PARTNERSHIP The foregoing Agreement is hereby
BY: BISYS FUND SERVICES, INC., accepted:
GENERAL PARTNER
---------------------------------
Company Name
By By
------------------------------------ ------------------------------
Stephen G. Mintos Date Date
Executive Vice President
Title:
--------------------------
4
<PAGE> 10
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
EXHIBIT A
TO THE DEALER AGREEMENT BETWEEN
BISYS FUND SERVICES LIMITED PARTNERSHIP
AND
------------------------
INVESTMENT PORTFOLIOS OF
------------------------
FUND NAME TYPE CUSIP QUOTRON
- --------- ---- ----- -------
A-1
<PAGE> 11
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
EXHIBIT B
TO THE DEALER AGREEMENT BETWEEN
BISYS FUND SERVICES LIMITED PARTNERSHIP
AND
------------------------
------------------------
BLUE SKY INFORMATION
- -------------------------------------------------------------------------------
FUND NAME STATES/JURISDICTIONS REGISTERED IN
- -------------------------------------------------------------------------------
B-1
<PAGE> 12
BISYS FUND SERVICES LIMITED PARTNERSHIP
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
EXHIBIT C
TO THE DEALER AGREEMENT BETWEEN
BISYS FUND SERVICES LIMITED PARTNERSHIP
AND
------------------------
COMMISSION AMOUNT PAYABLE FOR FUNDS
CHARGING A CONTINGENT DEFERRED SALES LOAD
_____ 1. ____ percent of the public offering price
_____ 2. Not Applicable
(Place a check next to the appropriate category)
C-1
<PAGE> 1
EXHIBIT 10
[ROPES & GRAY LETTERHEAD]
WRITER'S DIRECT DIAL NUMBER: (202) 626-2007
October 3, 1997
Eureka Funds
3534 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
You have informed us that you propose to register under the Securities
Act of 1933, as amended (the "1933 Act") and offer and sell from time to time
shares of beneficial interest of the Eureka Funds ("Shares"), $0.00001 par
value per share, at not less than "net asset value" as defined in your
By-Laws.
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston and are familiar with the action taken by your Trustee to
authorize the issue and sale of certain Shares to BISYS Fund Services, Inc.
("BISYS"). We have also examined a certificate of your treasurer of even date
herewith setting forth that as of the date hereof 20,000 Shares of the Eureka
Prime Money Market Fund, 20,000 Shares of the Eureka U.S. Treasury Obligations
Fund, 2,000 Shares of the Eureka Investment Grade Bond Fund, 2,000 Shares of the
Eureka Global Asset Allocation Fund, and 2,000 Shares of the Eureka Equity Fund,
have been issued and are outstanding, such Shares having been purchased by BISYS
for aggregate cash consideration of $100,000. We have also examined a copy of
your Bylaws and such other documents, receipts and records as we have deemed
necessary for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The beneficial interest in the Eureka Funds is divided into a unlimited
number of shares of beneficial interest, $0.00001 par value per share.
<PAGE> 2
Eureka Funds
October 3, 1997
Page 2
2. The issue and sale of the authorized but unissued Shares of the
Eureka Prime Money Market Fund, the Eureka U.S. Treasury Obligations Fund, the
Eureka Investment Grade Bond Fund, the Eureka Global Asset Allocation Fund, and
the Eureka Equity Fund have been duly authorized under Massachusetts law. Under
the original issue and sale of your authorized but unissued Shares and upon
receipt of the authorized consideration therefor in an amount not less than the
net asset value of the Shares established and in force at the time of their
sale, the Shares issued will be validly issued, fully paid and nonassessable.
3. The Shares issued and sold to BISYS aforesaid have been validly
issued and are fully paid and nonassessable.
The Eureka Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular series of Shares for all
loss and expenses of any shareholder of that series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
shareholder liability is limited to circumstances in which that series of
Shares itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with
registering an indefinite number of Shares of beneficial interest of the Eureka
Funds for offering and sale pursuant to the 1933 Act. We consent to the filing
of this opinion with and as part of Pre-Effective Amendment No. 2 to your
Registration Statement on Form N-1A (File No. 333-32483) relating to such offer
and sale.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
-2-
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and the references to our firm
under the caption "Legal Counsel" included in or made a part of Pre-Effective
Amendment No. 2 to the Registration Statement of the Eureka Funds on Form N-1A
(File No. 333-32483) under the Securities Act of 1933, as amended.
Ropes & Gray
Washington, D.C.
October 3, 1997
-4-
<PAGE> 1
Exhibit 11(b)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" in the Statement of Additional Information and to the use of our
report dated September 30, 1997 in Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A of Eureka Funds.
Ernst & Young LLP
Columbus, Ohio
September 30, 1997
<PAGE> 1
Exhibit 13
PURCHASE AGREEMENT
The Eureka Funds (the "Funds"), a Massachusetts business trust, and
BISYS Fund Services, Inc., a Delaware corporation, hereby agree with each other
as follows:
1. The Funds hereby offer BISYS Fund Services, Inc. and BISYS Fund
Services, Inc. hereby purchases 20,000 Trust Shares of Series A units of
beneficial interest in the Eureka Prime Money Market Fund, 20,000 Trust Shares
of Series B units of beneficial interest in the Eureka U.S. Treasury Obligations
Fund, at a price of $1.00 per Share, and 2,000 Trust Shares of Series C units
of beneficial interest in the Eureka Investment Grade Bond Fund, 2,000 Trust
Shares of Series D units of beneficial interest in the Eureka Global Asset
Allocation Fund and 2,000 Trust Shares of Series E units of beneficial
interest in the Eureka Equity Fund, (such units of beneficial interest being
hereinafter collectively known as "Shares") at a price of $10.00 per Share.
BISYS Fund Services, Inc. hereby acknowledges purchase of the Shares and the
Funds hereby acknowledge receipt from BISYS Fund Services, Inc. of funds in the
amount of $100,000 in full payment for the Shares.
2. BISYS Fund Services, Inc. represents and warrants to the Funds that
the Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. BISYS Fund Services, Inc. agrees that if it or any direct or
indirect transferee of any of the Shares redeems any of the Shares prior to the
fifth anniversary of the date the Funds begin their investment activities,
BISYS Fund Services, Inc. will pay to the Funds an amount equal to the number
resulting from multiplying the Funds' total unamortized organization expenses by
a fraction, the numerator of which is equal to the number of Shares redeemed by
BISYS Fund Services, Inc. or such transferee and the denominator of which is
equal to the number of Shares outstanding as of the date of such redemption, as
long as the administrative position of the staff of the Securities and Exchange
Commission requires such reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of _________, 1997.
Attest: EUREKA FUNDS
By
- ------------------------------ ------------------------------
Attest: BISYS FUND SERVICES, INC.
By
- ------------------------------ ------------------------------
<PAGE> 1
EXHIBIT 15(a)
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
EUREKA FUNDS
This Plan (the "Plan") constitutes the DISTRIBUTION AND SHAREHOLDER
SERVICES PLAN of the Eureka Funds, a Massachusetts business trust, adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"). Part A of the Plan relates to each series (each a "Fund") and class
of the units of participation ("Shares") of the Eureka Funds. Part B of the Plan
relates to the Shares of the Class A Shares of the Funds identified on Schedule
A hereto, as may be amended from time to time.
PART A
------
Section 1. The Eureka Funds have entered into a Distribution Agreement
(the "Agreement") with BISYS Fund Services, Inc. (the "Distributor"), under
which the Distributor uses all reasonable efforts, consistent with its other
business, to secure purchasers for the Eureka Funds' Shares. Under the
Agreement, the Distributor pays the expenses of printing and distributing any
prospectuses, reports and other literature used by the Distributor, advertising,
and other promotional activities in connection with the offering of the Eureka
Funds' Shares for sale to the public. BISYS Fund Services, Inc. also serves as
the Eureka Funds' Administrator, under a Management and Administration Agreement
with the Fund. It is understood that the Distributor may pay for these expenses
from any source available to it, including management and administration fees
paid to it by the Eureka Funds.
Section 2. The Distributor may, subject to the oversight of the Board
of Trustees of the Eureka Funds (the "Board of Trustees"), make payments to
securities dealers and other third parties who engage in the sale of Shares or
who render shareholder support services, including but not limited to providing
office space, equipment and telephone facilities, answering routine inquiries
regarding the Eureka Funds, processing shareholder transactions and providing
such other shareholder services as the Eureka Funds may reasonably request.
Section 3. The Eureka Funds will not make separate payments as a result
of this Part A of the Plan to the Distributor or any other party, it being
recognized that the Eureka Funds presently pays, and will continue to pay, a
management and administration fee to the Distributor. To the extent that any
payments made by the Fund to the Distributor, including payment of management
and administration fees, should be deemed to be indirect financing of any
activity primarily intended to result in the sale of the Shares issued by the
Eureka Funds within the context of Rule 12b-1 under the 1940 Act, then such
payments shall be deemed to be authorized by this Part A of the Plan.
Section 4. During the existence of this Part A of the Plan, the Eureka
Funds shall require the Distributor to provide the Eureka Funds, for review by
the Board of Trustees, and the Board of Trustees shall review, at least
quarterly, a written report of the amounts expended in
<PAGE> 2
connection with financing any activity primarily intended to result in the sale
of Shares issued by the Eureka Funds (making estimates of such costs where
necessary or desirable) and the purposes for which such expenditures were made.
PART B
------
WHEREAS, it is desirable to enable the Eureka Funds to have flexibility
in meeting the investment and Shareholder servicing needs of its future
investors; and
WHEREAS, the Board of Trustees, mindful of the requirements imposed by
Rule 12b-1 under the 1940 Act, has determined to effect the Plan for the
provision of distribution assistance with respect to the Class A Shares each
Fund listed on Schedule A hereto and for the provision of Shareholder services
with respect to the holders of such Shares of each Fund;
NOW THEREFORE, the Eureka Funds and the Distributor hereby agree as
follows:
Section 1. Each Fund, the Class A Shares of which are listed on
Schedule A hereto, shall pay out of its assets attributable to its Class A
Shares a distribution and shareholder services fee (the "A Share Fee") to the
Distributor equal to the lesser of (i) the fee at the applicable annual rate set
forth in Schedule A hereto or (ii) such fee as may from time to time be agreed
upon in writing by the Eureka Funds and the Distributor. The Distributor may
apply the A Share Fee toward the following: (i) compensation for its services in
connection with distribution assistance with respect to such Fund's A Shares or
for its services in connection with the rendering of Shareholder services to the
holders of such Fund's Class A Shares; (ii) payments to financial institutions
and intermediaries (such as insurance companies and investment counselors but
not including banks), broker-dealers, and the Distributor's affiliates and
subsidiaries as compensation for services and/or reimbursement of expenses
incurred in connection with distribution assistance with respect to such Fund's
Class A Shares; or (iii) payments to banks, other financial institutions and
intermediaries, broker-dealers, and the Distributor's affiliates and
subsidiaries as compensation for services and/or reimbursement of expenses
incurred in connection with the provision of Shareholder services to the holders
of such Fund's Class A Shares.
Section 2. The A Share Fee shall be accrued daily and payable monthly,
and shall be paid by each Fund to the Distributor irrespective of whether such
fee exceeds the amounts paid (or payable) by the Distributor pursuant to Section
1 of this Part B.
Section 3. The Plan shall not take effect with respect to the Class A
Shares of a Fund until it has been approved, together with any related
agreements, by a vote of a majority (or whatever greater percentage may, from
time to time, be required by Section 12(b) of the 1940 Act or the rules and
regulations thereunder) of the Trustees who are not "interested persons" of the
Eureka Funds (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of this Plan or in any agreements related to
this Plan (the "Independent Trustees"), cast in person at a meeting called for
the purpose of voting on the Plan or such agreement.
-2-
<PAGE> 3
Section 4. The Plan shall continue in effect with respect to a class of
a Fund for a period of more than one year after it takes effect, provided that
such continuance is specifically approved at least annually in the manner
provided for approval of the Plan in Section 3.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by a Fund pursuant to the Plan or any related agreement shall
provide to the Trustees of the Eureka Funds, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Section 6. The Plan may be terminated with respect to the Class A
Shares of a Fund at any time by vote of a majority of the Independent Trustees,
or by vote of a majority of the outstanding Class A Shares of that Fund.
Section 7. All agreements with any person relating to the
implementation of the Plan shall be in writing and any agreement related to the
Plan shall provide:
A. That such agreement, may be terminated with respect to the
Class A Shares of a Fund at any time, without payment of any
penalty, by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class A Shares of
that Fund, on not more than 60 days' written notice; and
B. That such agreement shall terminate automatically in the event
of its assignment.
Section 8. The Plan may not be amended to increase materially the
amount of the A Share Fee with respect to a Fund without approval by
Shareholders and Trustees in the manner provided in Sections 3 hereof, and all
material amendments to the Plan with respect to a Fund shall be approved in the
manner provided for approval of the Plan in Section 3.
Section 9. As used herein, the terms "assignment," "interested person,"
and "majority of the outstanding voting securities" shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
Section 10. The names "Eureka Funds" and "Trustees of the Eureka Funds"
refer respectively to the Eureka Funds created and the Trustees, as trustees but
not individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated April 7, 1997 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of the
Eureka Funds entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Eureka Funds personally, but bind only the assets of the
Eureka Funds, and all persons dealing with any series and/or class of Shares of
the Eureka Funds
-3-
<PAGE> 4
must look solely to the assets of the Eureka Funds belonging to such series
and/or class for the enforcement of any claims against the Eureka Funds.
By: EUREKA FUNDS
By:
----------------------------
BISYS FUND SERVICES, INC.
By:
----------------------------
Dated: October 21, 1997
-4-
<PAGE> 5
Dated: October 21, 1997
Schedule A to the
Distribution and Shareholder Services Plan
dated October 21, 1997
<TABLE>
<CAPTION>
Name of Funds Compensation*
- ------------- -------------
<S> <C>
Eureka Prime Money Market Fund -- Class Annual rate of twenty-five one-hundredths of
A Shares one percent (.25%) of the average daily net
assets of the Class A Shares of the Eureka
Prime Money Market Fund.
Eureka U.S. Treasury Obligations Fund -- Annual rate of twenty-five one-hundredths of
Class A Shares one percent (.25%) of the average daily net
assets of the Class A Shares of the Eureka
U.S. Treasury Obligations Fund.
Eureka Investment Grade Bond Fund -- Annual rate of twenty-five one-hundredths of
Class A Shares one percent (.25%) of the average daily net
assets of the Class A Shares of the Eureka
Investment Grade Bond Fund.
Eureka Global Asset Allocation Fund -- Annual rate of twenty-five one-hundredths of
Class A Shares one percent (.25%) of the average daily net
assets of the Class A Shares of the Eureka
Global Asset Allocation Fund.
Eureka Equity Fund -- Class A Shares Annual rate of twenty-five one-hundredths of
one percent (.25%) of the average daily net
assets of the Class A Shares of the Eureka
Equity Fund.
</TABLE>
EUREKA FUNDS
By:
--------------------
BISYS FUND SERVICES, INC.
By:
--------------------
- ----------
* All fees are computed and paid monthly.
A-1
<PAGE> 1
EXHIBIT 15(b)
BISYS FUND SERVICES LIMITED PARTNERSHIP
d/b/a BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
SHAREHOLDER SERVICING AGREEMENT
-------------------------------
Ladies and Gentlemen:
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services (the
"Distributor") serves as the distributor to the _____________________ (the
"Company"), an open-end management investment company organized as a
Massachusetts business trust and registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act"). Pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"), but subject to
the provisions of Section 4.1 hereof, the holders of the units of beneficial
interest ("Shares") of each of the investment portfolios (currently existing or
hereafter created) of the Company identified on Schedule A hereto (individually,
a "Fund"; collectively, the "Funds") have adopted or may adopt a Distribution
and Shareholder Servicing Plan (the "Plan") which, among other things,
authorizes the Distributor to enter into this Shareholder Servicing Agreement
with ______________________________ (the "Participating Organization"), with its
principal office located at ______________________, concerning the provision of
support services to the Participating Organization's customers ("Customers") who
may from time to time beneficially own Fund Shares. The terms and conditions of
this Agreement are as follows:
1. REFERENCE TO PROSPECTUS; DETERMINATION OF NET ASSET VALUE.
1.1 Reference is made to the prospectuses of the Funds (individually, a
"Prospectus"; collectively, the "Prospectuses") as from time to time are
effective under the Securities Act of 1933 (the "1933 Act"). Terms defined
therein and not otherwise defined herein are used herein with the meaning so
defined.
2. SERVICES AS PARTICIPATING ORGANIZATION.
2.1 The Participating Organization shall provide any combination of the
following support services, as agreed upon by the parties from time to time, to
Customers who may from time to time beneficially own Shares of a Fund: (i)
aggregating and processing purchase and redemption requests for a Fund's Shares
from Customers and placing net purchase and redemption orders with the
Distributor; (ii) processing dividend payments from the Company on behalf of
Customers; (iii) arranging for bank wire transfer of funds to or from a
Customer's account; (iv) responding to inquiries from Customers relating to the
services performed by the Participating Organization under this Agreement; (v)
providing subaccounting with respect to a Fund's Shares
<PAGE> 2
beneficially owned by Customers or the information to the Company necessary for
subaccounting; (vi) if required by law, forwarding Shareholder communications
from the Company (such as proxies, Shareholders reports, annual and semi-annual
financial statements, and dividend, distribution, and tax notices) to Customers;
(vii) forwarding to Customers proxy statements and proxies containing any
proposals regarding this Agreement or a Fund's Plan; (viii) providing such other
similar services as the Distributor may reasonably request to the extent the
Participating Organization is permitted to do so under applicable statutes,
rules, or regulations.
2.2 The Participating Organization will provide such office space and
equipment, telephone facilities, and personnel (which may be any part of the
space, equipment, and facilities currently used in the Participating
Organization's business, or any personnel employed by the Participating
Organization) as may be reasonably necessary or beneficial in order to provide
such services to Customers.
2.3 All orders for a Fund's Shares are subject to acceptance or
rejection by the Company in its sole discretion, and the Company may, in its
discretion and without notice, suspend or withdraw the sale of a Fund's Shares,
including the sale of such Shares to the Participating Organization for the
account of any Customer or Customers.
2.4 The Participating Organization shall act solely for, upon the order
of, and for the account of, its Customers. For all purposes of this Agreement,
the Participating Organization will be deemed to be an independent contractor,
and will have no authority to act as agent for the Distributor in any matter or
in any respect. No person is authorized to make any representations concerning
the Distributor, the Company, or a Fund's Shares except those representations
contained in the Fund's then-current Prospectus and the Company's Statement of
Additional Information and in such printed information as the Distributor or the
Company may subsequently prepare. The Participating Organization further agrees
to deliver to Customers, upon the request of the Distributor, copies of any
amended Prospectus and Statement of Additional Information.
2.5 The Participating Organization and its employees will, upon
request, be available during normal business hours to consult with the
Distributor or its designees concerning the performance of the Participating
Organization's responsibilities under this Agreement. In addition, the
Participating Organization will furnish to the Distributor, the Company or their
designees such information as the Distributor, the Company or their designees
may reasonably request (including, without limitation, periodic certifications
confirming the provision to Customers of the services described herein), and
will otherwise cooperate with the Distributor, the Company and their designees
(including, without limitation, any auditors designated by the Company), in the
preparation of reports to the Company's Board of Trustees concerning this
Agreement, as well as any other reports or filings that may be required by law.
2
<PAGE> 3
3. COMPENSATION.
3.1 The Distributor shall pay the Participating Organization for the
services to be provided by the Participating Organization under this Agreement
in accordance with, and in the manner set forth in, Schedule B hereto, as such
Schedule may be amended from time to time.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
4.1 By written acceptance of this Agreement, the Participating
Organization further represents, warrants, and agrees that: (i) the
Participating Organization believes that it possesses the legal authority to
perform the services contemplated by this Agreement without violation of
applicable Federal banking laws (including the Glass-Steagall Act) and
regulations.
5. EXCULPATION; INDEMNIFICATION.
5.1 The Distributor shall not be liable to the Participating
Organization and the Participating Organization shall not be liable to the
Distributor except for acts or failures to act which constitute lack of good
faith or gross negligence and for obligations expressly assumed by either party
hereunder. Nothing contained in this Agreement is intended to operate as a
waiver by the Distributor or by the Participating Organization of compliance
with any applicable federal or state law, rule, or regulation and the rules and
regulations promulgated by the National Association of Securities Dealers, Inc.
6. EFFECTIVE DATE; TERMINATION.
6.1 This Agreement will become effective with respect to each Fund on
the date a fully executed copy of this Agreement is received by the Distributor
or its designee. Unless sooner terminated with respect to any Fund, this
Agreement will continue with respect to a Fund until
___________________________, 19__, and thereafter will continue automatically
for successive annual periods ending on _________________ of each year, provided
such continuance is specifically approved at least annually by the vote of a
majority of the members of the Board of Trustees of the Company who are not
"interested persons" (as such term is defined in the 1940 Act) and who have no
direct or indirect financial interest in the Plan relating to such Fund or any
agreement relating to such Plan, including this Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
6.2 This Agreement will automatically terminate with respect to a Fund
in the event of its assignment (as such term is defined in the 1940 Act) with
respect to such Fund. This Agreement may be terminated with respect to any Fund
by the Distributor or by the Participating Organization, without penalty, upon
ten days' prior written notice to the other party. This Agreement may also be
terminated with respect to any Fund at any time without penalty by the vote of a
majority of the members of the Board of Trustees of the Company who are not
"interested persons" (as such term is defined in the 1940 Act) and who have no
direct or indirect
3
<PAGE> 4
financial interest in the Plan relating to such Fund or any agreement relating
to such Plan, including this Agreement, or by a vote of a majority of the Shares
of such Fund on ten days' written notice.
7. GENERAL.
7.1 All notices and other communications to either the Participating
Organization or the Distributor will be duly given if mailed, telegraphed or
telecopied to the appropriate address set forth on page 1 hereof, or at such
other address as either party may provide in writing to the other party.
7.2 The Distributor may enter into other similar agreements for the
provision of Shareholder services with any other person or persons without the
Participating Organization's consent.
7.3 This Agreement supersedes any other agreement between the
Distributor and the Participating Organization relating to the provision of
support services to the Participating Organization's Customers who beneficially
own a Fund's Shares and relating to any other matters discussed herein. All
covenants, agreements, representations, and warranties made herein shall be
deemed to have been material and relied on by each party, notwithstanding any
investigation made by either party or on behalf of either party, and shall
survive the execution and delivery of this Agreement. The invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of any other term or provision hereof. The headings in this
Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof. This Agreement may be executed in any number of
counterparts which together shall constitute one instrument and shall be
governed by and construed in accordance with the laws (other than the conflict
of laws rules) of the State of Ohio and shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns.
4
<PAGE> 5
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below indicated.
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By:
---------------------------
Title:
------------------------
Date:
-------------------------
ACCEPTED AND AGREED TO:
------------------------------
By:
---------------------------
Title:
------------------------
Date:
-------------------------
5
<PAGE> 6
Schedule A
to the
Shareholder Servicing Agreement with Respect to
Distribution Assistance and Shareholder Services
between BISYS Fund Services Limited Partnership
and ______________________________________
FUNDS
-----
This Agreement shall apply to (i) all Funds of the Company that have
adopted a Distribution and Shareholder Servicing Plan (the "Plan") as of the
effective date of this Agreement and (ii) all Funds hereafter created that adopt
the Plan. The current Funds that have adopted the Plan are set forth below:
BISYS FUND SERVICES
LIMITED PARTNERSHIP ACCEPTED AND AGREED TO:
By: BISYS Fund Services, Inc., -------------------------------
General Partner
By: By:
------------------------ ----------------------------
Title: Title:
--------------------- -------------------------
Date: Date:
---------------------- --------------------------
A-1
<PAGE> 7
Schedule B
to the
Shareholder Servicing Agreement with Respect to
Distribution Assistance and Shareholder Services
between BISYS Fund Services Limited Partnership
and ______________________________________
COMPENSATION(1)
---------------
The Participating Organization shall receive a fee calculated at an
annual rate of _______ one-hundredths of one percent (.____%) of each Fund's
average daily net assets attributable to Shares beneficially owned by the
Participating Organization's Customers.
BISYS FUND SERVICES
LIMITED PARTNERSHIP ACCEPTED AND AGREED TO:
By: BISYS Fund Services, Inc., -------------------------------
General Partner
By: By:
------------------------ ----------------------------
Title: Title:
--------------------- -------------------------
Date: Date:
---------------------- --------------------------
- --------
(1) All fees are computed daily and paid periodically.
B-1
<PAGE> 8
[BISYS LOGO]
BISYS FUND SERVICES LIMITED PARTNERSHIP, SERVICING AGENT
3435 Stelzer Road
Columbus, Ohio 43219-3035
SHAREHOLDER SERVICES AGREEMENT
Ladies and Gentlemen:
As the servicing agent for the principal underwriter of the shares ("Shares") of
each investment company portfolio ("Fund") of ____________________________ (the
"Trust"), BISYS Fund Services Limited Partnership ("BISYS") hereby agrees that
you, the undersigned broker-dealer, shall provide the shareholder services that
are more fully described below.
1. We represent and warrant to you that the shareholder services described
herein have been authorized pursuant to a Distribution and Shareholder
Services Plan (the "Plan") adopted by the shareholders ("Shareholders")
of each Fund. The Plan has been adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "1940 Act"). It is intended
that you shall provide such shareholder services to your customers
("Customers") who may, from time to time, beneficially own a Fund's
Shares.
2. You represent and warrant to us that (i) you are and will be at all
times relevant to this Agreement a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"), and (ii)
you are and will be at all times relevant to this Agreement a
broker-dealer properly registered and qualified under all applicable
federal, state and local laws to engage in the business and
transactions described in this Agreement. You agree to comply with all
applicable laws, including federal and state securities laws, the Rules
and Regulations of the Securities and Exchange Commission and the Rules
of Fair Practice of the NASD. We have furnished you with a list of the
states or other jurisdictions in which Shares of the Funds have been
registered for sale under, or are otherwise qualified for sale pursuant
to, the respective securities laws of such states and jurisdictions.
You agree that you will not offer a Fund's Shares to persons in any
jurisdiction in which such Shares are not registered or otherwise
qualified for sale. You further agree that you will maintain all
records required by applicable law or otherwise reasonably requested by
us relating to Fund transactions that you have executed.
3. You agree to provide various types of distribution assistance and
Shareholder support services with respect to a Fund's Shares. Such
distribution assistance and Shareholder support services may include
those items that are enumerated in Schedule A attached hereto and such
other similar services that we may reasonably request to the extent you
are permitted to do so under applicable statutes, rules and
regulations.
4. For all purposes of this Agreement, you shall be deemed to be an
independent contractor, and shall have no authority to act as agent for
us or for the Trust in any matter or in any respect. No person is
authorized to make any representations concerning us, the Trust, or a
Fund's Shares except those representations contained in the Fund's
then-current Prospectus and the Trust's Statement of Additional
Information and in such printed information as we or the Trust may
subsequently prepare. You are specifically authorized to distribute to
Customers a Fund's Prospectus (including any supplements to such
Prospectus), the Trust's Statement of Additional Information and sales
material
<PAGE> 9
received from us. No person is authorized to distribute any other sales
material relating to the Trust without our prior written approval. You
further agree to deliver to Customers, upon our request, copies of
amended Prospectuses and Statements of Additional Information.
5. You and your employees will, upon request, be available during normal
business hours to consult with us concerning the performance of your
responsibilities under this Agreement. In addition, you will furnish to
us or to the Trust such information as we or the Trust may reasonably
request (including, without limitation, periodic certifications
confirming the rendering of distribution assistance and support
services with respect to Shares described herein), and will otherwise
cooperate with us and the Trust in the preparation of reports to the
Trust's Board of Trustees concerning this Agreement and the monies paid
or payable by us under this Agreement, as well as any other reports or
filings that may be required by law.
6. The minimum dollar purchase of a Fund's Shares (including Shares being
acquired by Customers pursuant to the exchange privileges described in
the Fund's Prospectus) shall be the applicable minimum amount set forth
in the Prospectus of such Fund, and no order for less than such amount
shall be accepted by you. The procedures relating to the handling of
orders shall be subject to instructions which we shall forward to you
from time to time. All orders for a Fund's Shares are subject to
acceptance or rejection by the Trust in its sole discretion, and the
Trust may, in its discretion and without notice, suspend or withdraw
the sale of a Fund's Shares, including the sale of such Shares to you
for the account of any Customer or Customers. You acknowledge that it
is your responsibility to date and time stamp all orders received by
you and to transmit such orders promptly to us. You further acknowledge
that any failure to promptly transmit such orders to us that causes a
purchaser of Shares to be disadvantaged, based upon the pricing
requirements of Rule 22c-1 under the 1940 Act, shall be your sole
responsibility. We reserve the right to cancel this Agreement at any
time without notice if any Shares shall be offered for sale by you at
less than the then-current offering price determined by or for the
applicable Fund.
7. For the services provided under this Agreement, you shall receive a fee
calculated at the applicable annual rate set forth on Schedule B hereto
with respect to the average daily net asset value of each Fund's Shares
which are owned of record by you as nominee for Customers or which are
owned by Customers whose records, as maintained by such Fund or its
agent, designate you as the Customer's dealer of record, which fee will
be computed daily and paid monthly. The fee rate stated on Schedule B
hereto may be prospectively increased or decreased by us in our sole
discretion, at any time upon notice to you. Such fee shall be subject
to the limitations on the payment of asset-based sales charges that are
set forth in Article III, Section 26 of the NASD's Rules of Fair
Practice.
8. Neither of us shall be liable to the other except for (1) acts or
failures to act which constitute a lack of good faith or negligence and
(2) obligations expressly assumed under this Agreement. In addition,
you agree to indemnify us and hold us harmless from any claims or
assertions relating to the lawfulness of your participation in this
Agreement and the transactions contemplated hereby or relating to any
activities of any persons or entities affiliated with your organization
which are performed in connection with the discharge of your
responsibilities under this Agreement. If such claims are asserted, we
shall have the right to manage our own defense, including the selection
and engagement of legal counsel, and all costs of such defense shall be
borne by you.
9. This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by either of us, without
penalty, upon ten days' prior written notice to the other party. This
Agreement may also be terminated at any time without penalty by the
vote of a majority of the members of a Fund's Board of Trustees who are
not "interested persons" (as such term is defined in the 1940 Act), or
(with respect to a Fund) by a vote of a majority of the outstanding
voting securities of that Fund on ten days' written notice.
2
<PAGE> 10
10. All communications to us shall be sent to the address set forth on page
1 hereof or at such other address as we may designate in writing. Any
notice to you shall be duly given if mailed or telecopied to you at the
address set forth below or at such other address as you may provide in
writing.
------------------------------------------
------------------------------------------
------------------------------------------
11. You hereby represent that all requisite corporate proceedings have been
undertaken to authorize you to enter into this Agreement and to perform
the services contemplated herein. You further represent that the
individual that has signed this Agreement below is a duly elected
officer that has been empowered to act for and on behalf of your
organization with respect to the execution of this Agreement.
12. This Agreement supersedes any other agreement between us with respect
to the offer and sale of Shares and relating to any other matters
discussed herein. All covenants, agreements, representations and
warranties made herein shall be deemed to have been material and relied
on by each party. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any
other term or provision thereof. This Agreement may be executed in any
number of counterparts, which together shall constitute one instrument,
and shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of the State of Ohio and shall
bind and insure to the benefit of the parties hereto and their
respective successors and assigns.
If the foregoing corresponds with your understanding of our agreement, please
sign this document and the accompanying copies thereof in the appropriate space
below and return the same to us, whereupon this Agreement shall be binding upon
each of us, effective as of the date of execution.
BISYS FUND SERVICES LIMITED PARTNERSHIP The foregoing Agreement is hereby
BY: BISYS FUND SERVICES, INC., accepted:
GENERAL PARTNER
----------------------------
Company Name
By By
------------------------------------- ------------------------------
Stephen G. Mintos Date Date
Executive Vice President
Title:
--------------------------
3
<PAGE> 11
Dated: As of _____________
Schedule A
to the
Shareholder Services Agreement
Shareholder Services
--------------------
In accordance with Section 3 of the Shareholder Services Agreement, you agree to
provide various types of distribution assistance and shareholder support
services that we may reasonably request with respect to Fund Shares that are
beneficially owned by your Customers. Such distribution assistance and
shareholder support services may include the following.
Distribution Assistance
- -----------------------
(i) placing orders with the Trust for the purchase or exchange of a Fund's
Shares and tendering a Fund's Shares to the Trust for redemption; (ii) promoting
the purchase of Shares by Customers; (iii) responding to inquiries from
Customers concerning their investments in Fund Shares; (iv) engaging in
advertising with respect to a Fund's Shares; and (v) distributing Fund
prospectuses, reports and sales literature.
Shareholder Support Services
- ----------------------------
(i) providing Customers with a service that invests the assets of their accounts
in a Fund's Shares pursuant to specific or pre-authorized instructions; (ii)
processing dividend payments from the Trust on behalf of Customers; (iii)
providing information periodically to Customers showing their positions in a
Fund's Shares; (iv) arranging for bank wire transfers of funds to or from a
Customer's account; (v) responding to inquiries from Customers relating to the
services performed by the Participating Organization under this Agreement; (vi)
providing subaccounting, in the case of omnibus accounts, with respect to a
Fund's Shares beneficially owned by Customers or the information to the Trust
necessary for subaccounting; (vii) if required by law, forwarding Shareholder
communications from the Trust (such as proxies, Shareholder reports, annual and
semi-annual financial statements, and dividend, distribution, and tax notices)
to Customers; (viii) forwarding to Customers proxy statements and proxies
containing any proposals regarding this Agreement or a Fund's Plan; and (ix)
rendering ongoing advice respecting the suitability of particular investment
opportunities offered by the Trust in light of the Customer's need.
A-1
<PAGE> 12
Dated: As of _____________
Schedule B
to the
Shareholder Services Agreement
Compensation
------------
Annual rate of up to _____ one-hundredths of one percent (____%) of the
average daily net asset value of each Fund's Shares held of record by
you from time to time on behalf of Customers.
- ----------
* All fees are computed daily and paid monthly.
B-1
<PAGE> 1
EXHIBIT 18
MULTIPLE CLASS PLAN
EUREKA FUNDS
This constitutes a MULTIPLE CLASS PLAN (the "Plan") of the Eureka
Funds, a Massachusetts business trust, adopted pursuant to Rule 18f-3(d) under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Plan is
applicable to each series of the Eureka Funds' units of beneficial interest
(each a "Fund" and collectively the "Funds").
WHEREAS, it is desirable to enable the Eureka Funds to have flexibility
in meeting the investment and shareholder servicing needs of its current and
future investors; and
WHEREAS, the Board of Trustees of the Eureka Funds (the "Board of
Trustees"), including a majority of the Trustees who are not "interested
persons" of the Eureka Funds, as such term is defined by the 1940 Act, mindful
of the requirements imposed by Rule 18f-3(d) under the 1940 Act, has determined
to adopt this Plan to enable the Funds to provide appropriate services to
certain designated classes of shareholders of the Funds;
NOW, THEREFORE, the Eureka Funds designate the Plan as follows:
1. Designation of Classes. Each Fund shall offer its units of
beneficial interest ("Shares") in two classes: Trust Shares and Class A Shares.
2. Purchases. Trust Shares may be purchased through procedures
established by the distributor in connection with the requirements of fiduciary,
advisory, agency, custodial and other similar accounts maintained by or on
behalf of customers of Sanwa Bank California or one of its affiliates or other
financial service providers, as outlined in the Registration Statement of the
Eureka Funds. Class A Shares are distributed to the general public pursuant to
procedures outlined in the Registration Statement of the Eureka Funds. Both the
Trust Shares and the Class A Shares are subject to a minimum initial purchase
amount.
3. Shareholder Services. Shareholders of Trust Shares who are employees
of Sanwa Bank California and Shareholders of Class A Shares may make automatic
investments in a Fund from their bank accounts. Shareholders of Trust Shares and
Class A Shares may also make regular exchanges and redemptions of Class A
Shares.
4. Sales Charges. Trust Shares and Class A Shares are not subject to a
sales charge at the time of purchase or upon redemption.
5. Distribution and Shareholder Services Fee.
Trust Shares
Trust Shares are not subject to a distribution and shareholder services
fee.
<PAGE> 2
Class A Shares
- --------------
Class A Shares are subject to a distribution and shareholder services
fee assessed in accordance with the distribution and shareholder services plan
adopted by the Eureka Funds (the "Plan") (the "A Share Fee").
6. Exchanges.
Trust Shares
- ------------
Trust Shares of each Fund may be exchanged for Trust Shares of the
other Funds, provided that the Shareholder making the exchange is eligible on
the date of the exchange to purchase Trust Shares. Trust Shares of each Fund may
be exchanged for Class A Shares in instances where the Shareholder ceases to be
eligible to purchase Trust Shares.
Class A Shares
- --------------
Class A Shares of each Fund may be exchanged for Class A Shares of the
other Funds, provided that the Shareholder making the exchange is eligible on
the date of the exchange to purchase Class A Shares. Class A Shares of each Fund
may be exchanged for Trust Shares in instances where the Shareholder becomes
eligible to purchase Trust Shares.
7. Redemptions. Trust Shares and Class A Shares may be redeemed without
charge.
8. Voting Rights. Each Share held entitles the Shareholder of record to
one vote (with proportional voting for fractional Shares) on such matters as
Shareholders are entitled to vote. Each Fund will vote separately on matters
relating solely to that Fund. Each class of a Fund shall have exclusive voting
rights on any matter submitted to Shareholders that relates solely to that
class, and shall have separate voting rights on any matter submitted to
Shareholders in which the interests of one class differ from the interests of
any other class. However, all Fund Shareholders will have equal voting rights on
matters that affect all Fund Shareholders equally.
9. Expense Allocation. Each class shall pay the expenses associated
with its different distribution and shareholder services arrangement. Each class
may, at the Board's discretion, also pay a different share of other expenses,
not including advisory or custodial fees or other expenses related to the
management of the Eureka Funds' assets, if these expenses are actually incurred
in a different amount by that class, or if the class receives services of a
different kind or to a different degree than other classes. All other expenses
will be allocated to each class on the basis of the relative net asset value of
that class in relation to the net asset value of the Fund.
10. Dividends. The amount of dividends payable on Trust Shares may be
more than the dividends payable on Class A Shares because of the A Share Fee
charged to Class A Shares, pursuant to the Plan.
11. Termination and Amendment. This Plan may be terminated or amended
pursuant to the requirement of Rule 18f-3(d) under the 1940 Act.
-2-
<PAGE> 3
12. The names "Eureka Funds" and "Trustees of the Eureka Funds" refer
respectively to the Eureka Funds created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of the Eureka Funds dated April 7, 1997 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
the Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of the
Eureka Funds entered into in the name or on behalf thereof by any of the Eureka
Funds, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Eureka Funds personally, but bind only the assets of the
Eureka Funds, and all persons dealing with any series and/or class of Shares of
the Eureka Funds must look solely to the assets of the Eureka Funds belonging to
such series and/or class for the enforcement of any claims against the Eureka
Funds.
Adopted by the Board of Trustees on October 21, 1997
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