U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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Pre-Effective Amendment No. ____________
Post-Effective Amendment No. ___________
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
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Amendment No. ______________
(Check appropriate box or boxes)
LAKE SHORE FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 579-8700
Earl V. (Buck) Newsome, Jr.
Lake Shore Fund Group, Ltd.
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
(Name and Address of Agent for Service)
Copies to:
Cassandra M. Wambaugh
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
The Registrant hereby declares its intention to register an indefinite
number of shares of beneficial interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended.
The Registrant hereby amends this Registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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LAKE SHORE FAMILY OF FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUS
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Performance Information
4. General Description of Registrant Investment Objectives,
Investment Policies and
Risk Considerations;
Operation of the Funds
5. Management of the Fund Operation of the Funds
6. Capital Stock and Other Securities Cover Page; Operation of
the Funds; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Exchange Privilege;
Distribution Plan;
Calculation of Share
Price and Public Offering
Price; Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Exchange Privilege
9. Pending Legal Proceedings Inapplicable
PART B
CAPTION IN
STATMENT
OF ADDITIONAL
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ITEM NO. REGISTRATION STATEMENT CAPTION INFORMATION
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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<CAPTION>
<S> <C> <C>
12. General Information and History The Trust
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Inapplicable
of Securities
16. Investment Advisory and Other Services The Investment Adviser;
Distribution Plan;
Custodian; Auditors;
Countrywide Fund
Services, Inc.
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Trust
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price and Public Offering
Price; Other Purchase
Information; Redemption
in Kind
20. Tax Status Taxes
21. Underwriters The Underwriter
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Statements of Assets and
Liabilities
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PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
(ii)
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PROSPECTUS
_________, 1997
LAKE SHORE FAMILY OF FUNDS
403 VINE STREET
2ND FLOOR
CINCINNATI, OHIO 45202
The Lake Shore Family of Funds currently offers two separate series of shares to
investors: the Equity Fund and the Balanced Fund (individually a "Fund" and
collectively the "Funds").
THE EQUITY FUND seeks long-term growth of capital by investing primarily in
common stocks. Dividend and interest income is only an incidental consideration
to the Fund's investment objective.
THE BALANCED FUND seeks long-term growth of capital and current income by
investing in a balanced portfolio of common stocks, U.S. Treasury obligations
and money market instruments.
Lake Shore Fund Group, Ltd. (the "Adviser"), 403 Vine Street, 2nd Floor,
Cincinnati, Ohio 45202, manages the Funds' investments.
This Prospectus sets forth concisely the information about the Funds that
potential investors should know before investing. Please retain this Prospectus
for future reference. A Statement of Additional Information dated __________,
1997 has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling one of the numbers listed
below.
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For Information or Assistance in Opening An Account, Please Call:
Nationwide (Toll-Free) . . . . . . .. . . .. . . . . . . . . . . . 888-___-____
Cincinnati . . . . . . . . . . . . . . . .. . . .. . . . . . . . . 513-___-____
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
EXPENSE INFORMATION....................................................... 2
INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK
CONSIDERATIONS................................................... 3
HOW TO PURCHASE SHARE..................................................... 9
SHAREHOLDER SERVICES...................................................... 13
HOW TO REDEEM SHARES...................................................... 14
EXCHANGE PRIVILEGE........................................................ 15
DIVIDENDS AND DISTRIBUTIONS............................................... 16
TAXES..................................................................... 17
OPERATION OF THE FUNDS.................................................... 17
DISTRIBUTION PLAN......................................................... 19
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE...................... 21
PERFORMANCE INFORMATION................................................... 21
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EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 5.00%
Maximum Deferred Sales Load None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee None*
* A wire transfer fee is charged in the case of redemptions made by wire. Such
fee is subject to change and is currently $9. See "How to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees(1) .25%
Other Expenses .73%
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Total Fund Operating Expenses 1.98%
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(1) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers.
EXAMPLE: You would pay the following expenses on a $1,000 investment,
whether or not you redeem at the end of the period, assuming 5% annual return:
1 Year $ 70
3 Years 112
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. See "Operation of the Fund" for more information about the fees
and costs of operating the Fund. The percentages expressing "Other Expenses" are
based on estimated amounts for the current fiscal year. THE EXAMPLE SHOWN SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
IN THE FUTURE MAY BE GREATER OR LESS THAN THOSE SHOWN.
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INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Lake Shore Family of Funds (the "Trust") is comprised of two Funds,
each with its own portfolio and investment objective. Neither of the Funds is
intended to be a complete investment program and there is no assurance that the
investment objective of any Fund can be achieved. Each Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
but only after notification has been given to shareholders and after this
Prospectus has been revised accordingly. If there is a change in a Fund's
investment objective, shareholders should consider whether such Fund remains an
appropriate investment in light of their then current financial position and
needs. Unless otherwise indicated, all investment practices and limitations of
the Funds are nonfundamental policies which may be changed by the Board of
Trustees without shareholder approval.
EQUITY FUND
The Equity Fund seeks long-term growth of capital by investing primarily
in common stocks. Dividend and interest income is only an incidental
consideration to the Fund's investment objective.
Under normal circumstances, at least 65% of the Fund's total assets will
be invested in common stocks. The Fund will only invest in common stocks which
are listed on the Standard & Poor's 500 Stock Index (the "S&P 500") at the time
of investment. The S&P 500 is comprised of 500 selected common stocks which tend
to be the leading companies in the leading industries within the U.S. economy,
most of which are listed on the New York Stock Exchange.
The equity management strategy employed by the Adviser is based on the
belief that quantitative disciplines, which contain both buying and selling
parameters, will add value to a portfolio. The use of two independent,
contrasting styles, and defensive action when the market is determined to be in
a high-risk period, will add consistency to the Fund's performance, in the
opinion of the Adviser.
The two complimentary styles employed by the Adviser are price momentum
and value investing. The price momentum style focuses on those stocks which are
performing the best relative to the rest of the market. The goal of this style
is to be invested in those stocks which are exhibiting rapid increases in price.
At the other end of the investment spectrum, the value style focuses on those
stocks which appear to be the most attractively priced relative to the rest of
the market, and which are expected to appreciate over time as investors
recognize their inherent value.
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The Fund will maintain a core portfolio of approximately 30 stocks.
Approximately 10 of these stocks will be selected from the S&P 500 on the basis
of price momentum, i.e. those stocks exhibiting the most rapid increases in
price according to the Adviser's quantitative model. A second group of
approximately 10 stocks will be selected also on the basis of price momentum;
however, these stocks will be selected from a composite group of 75 stocks
judged by the Adviser to be among the least volatile and most risk-adverse
stocks in the S&P 500. A final group of approximately 10 stocks will be selected
from this same composite group of 75 companies on the basis of value, i.e. those
stocks which appear to be the most attractively priced relative to the rest of
the market based upon the Adviser's quantitative assessment of such factors as
yield, price-to-earnings ratio and dividend coverage.
Investments in common stocks are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions, quality ratings and
other factors beyond the control of the Adviser. As a result, the return and net
asset value of the Fund will fluctuate.
When the Adviser believes substantial price risks exist for common
stocks because of uncertainties in the investment outlook or when in the
judgment of the Adviser it is otherwise warranted in selling to manage the
Fund's portfolio, the Fund may temporarily hold for defensive purposes all or a
portion of its assets in money market instruments such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market investment companies or repurchase agreements
collateralized by U.S. Government obligations.
BALANCED FUND
The Balanced Fund seeks long-term growth of capital and current income
by investing in a balanced portfolio consisting of common stocks, U.S. Treasury
obligations and money market instruments. Under normal circumstances, the asset
mix of the Fund will range between 40-75 percent in common stocks, 25-60 percent
in U.S. Treasury obligations and 0-35 percent in money market instruments.
Moderate shifts between asset classes are made in an attempt to maximize returns
or reduce risk.
The Fund attempts to achieve growth of capital through its investments
in common stocks. The Fund will invest only in the common stocks of issuers
listed on the S&P 500. The Fund attempts to earn current income and at the same
time achieve moderate growth of capital and/or reduce fluctuation in the net
asset value of its shares by investing in U.S. Treasury
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obligations. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. However, shares of the Fund are not guaranteed
or backed by the United States Government. The Fund also attempts to earn
current income and reduce fluctuation in the net asset value of its shares by
investing in money market instruments such as bank debt instruments
(certificates of deposit, bankers' acceptances and time deposits), commercial
paper, U.S. Government obligations having a maturity of less than one year,
shares of money market investment companies or repurchase agreements
collateralized by U.S. Government obligations.
The balanced management strategy employed by the Adviser is based on the
belief that quantitative disciplines, which contain both buying and selling
parameters, will add value to a portfolio. The use of two independent,
contrasting styles will add consistency to the Fund's performance, in the
opinion of the Adviser. Credit quality and conservatism are stressed with the
purchase of only common stocks from the S&P 500, U.S. Treasury obligations and
money market instruments.
The two complimentary styles employed by the Adviser are price momentum
and value investing. For common stocks, the price momentum style focuses on
those stocks which are performing the best relative to the rest of the market.
The goal of this style is to be invested in those stocks which are exhibiting
rapid increases in price. At the other end of the investment spectrum, the value
style focuses on those stocks which appear to be the most attractively priced
relative to the rest of the market, and which will appreciate over time as
investors recognize their inherent value.
For U.S. Treasury obligations, the price momentum style attempts to take
advantage of the Adviser's belief that once interest rate trends are in place,
they tend to persist for a relatively long period of time. Both short-term and
long-term interest rate momentum is taken into account. In regards to value, the
Adviser compares the yield between Treasury bills and the 30-year Treasury bond.
When the spread is wide, the investor is being compensated for taking risk and
longer maturity securities should be owned; when the spread is narrow, there is
not adequate compensation and shorter-term securities are preferable. The Fund
intends to invest only in U.S. Treasury obligations with remaining maturities of
10 years or less at the time of purchase.
The asset mix of the Fund will be dictated by the position of
quantitative models. When a favorable environment for stocks is indicated, the
Fund intends to maintain a portfolio of approximately 30 stocks selected
according to the momentum style (10 stocks) and value style (20 stocks). When an
unfavorable environment is indicated, the momentum style component of the
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portfolio, which is generally believed by the Adviser to be the more volatile
component, will be liquidated and the proceeds will be invested in U.S. Treasury
obligations or money market instruments. The composition of the Fund's holdings
in U.S. Treasury obligations will be dependent upon whether the interest rate
momentum and value models are positive or negative. The average maturity will be
lengthened when both models are positive and shortened when one or both are
negative.
Because the Fund intends to allocate its assets among common stocks,
U.S. Treasury obligations and money market instruments, it may not be able to
achieve, at times, a total return as high as that of a portfolio with complete
freedom to invest its assets entirely in any one type of security. Likewise, the
Fund may not achieve the degree of capital appreciation that a portfolio
investing solely in common stocks might achieve.
Investments in common stocks and U.S. Treasury obligations are subject
to inherent market risks and fluctuations in value due to changes in earnings,
economic conditions, quality ratings and other factors beyond the control of the
Adviser. U.S. Treasury obligations are also subject to price fluctuations based
upon changes in the level of interest rates, which will generally result in all
those securities changing in price in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise. Securities with longer maturities generally offer both
higher yields and greater exposure to market fluctuation from changes in
interest rates. As a result, the return and net asset value of the Fund will
fluctuate.
Investors should be aware that the investment results of the Fund depend
upon the ability of the Adviser to correctly anticipate the relative performance
and risk of commons stocks and U.S. Treasury obligations of varying maturities.
Historical evidence indicates that correctly timing portfolio allocations among
these asset classes has been an extremely difficult investment strategy to
implement successfully. There can be no assurance that the Adviser will
correctly anticipate relative asset class performance in the future on a
consistent basis. Investment results would suffer, for example, if only a small
portion of the Fund's assets were invested in common stocks during a significant
stock market advance or if a major portion were invested in common stocks during
a major decline.
When the Adviser believes substantial price risks exist for common
stocks and/or U.S. Treasury obligations because of uncertainties in the
investment outlook or when in the judgment of the Adviser it is otherwise
warranted in selling to manage the Fund's portfolio, the Fund may temporarily
hold for defensive purposes up to 100% of its assets in money market
instruments.
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ADDITIONAL INVESTMENT INFORMATION
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include
securities which are issued or guaranteed by the United States Treasury, by
various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. U.S. Treasury obligations include Treasury
bills, Treasury notes and Treasury bonds. U.S. Treasury obligations also include
the separate principal and interest components of U.S. Treasury obligations
which are traded under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Agencies or instrumentalities established by
the United States Government include the Federal Home Loan Banks, the Federal
Land Bank, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student
Loan Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing Bank,
the Federal Farm Credit Banks, the Federal Agricultural Mortgage Corporation,
the Resolution Funding Corporation, the Financing Corporation of America and the
Tennessee Valley Authority. Some of these securities are supported by the full
faith and credit of the United States Government while others are supported only
by the credit of the agency or instrumentality, which may include the right of
the issuer to borrow from the United States Treasury. In the case of securities
not backed by the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against the United
States in the event the agency or instrumentality does not meet its commitments.
Shares of the Funds are not guaranteed or backed by the United States
Government.
BORROWING AND PLEDGING. Each Fund may borrow money from banks, provided
that, immediately after any such borrowings, there is asset coverage of 300% for
all borrowings of the Fund. A Fund will not make any borrowing which would cause
its outstanding borrowings to exceed one-third of the value of its total assets.
Each Fund may pledge assets in connection with borrowings but will not pledge
more than one-third of its total assets. Borrowing magnifies the potential for
gain or loss on the portfolio securities of the Funds and, therefore, if
employed, increases the possibility of fluctuation in a Fund's net asset value.
This is the speculative factor known as leverage. Each Fund's policies on
borrowing and pledging are fundamental policies which may not be changed without
the affirmative vote of a majority of its outstanding shares. It is the Funds'
present intention, which may be changed by the Board of Trustees without
shareholder approval, to borrow only for emergency or extraordinary purposes and
not for leverage.
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LENDING PORTFOLIO SECURITIES. Each Fund may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks, brokers
and dealers and receive as collateral cash, U.S. Government obligations or
irrevocable bank letters of credit (or any combination thereof), which
collateral will be required to be maintained at all times in an amount equal to
at least 100% of the current value of the loaned securities plus accrued
interest. Although each of the Funds does have the ability to make loans of all
of its portfolio securities, it is the present intention of the Trust, which may
be changed without shareholder approval, that such loans will not be made with
respect to a Fund if as a result the aggregate of all outstanding loans exceeds
one-third of the value of the Fund's total assets. Securities lending will
afford a Fund the opportunity to earn additional income because the Fund will
continue to be entitled to the interest payable on the loaned securities and
also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. A
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial rights. A Fund may pay reasonable fees in
connection with arranging such loans.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Repurchase agreements are transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at an agreed upon
time and price, thereby determining the yield during the term of the agreement.
In the event of a bankruptcy or other default of the seller of a repurchase
agreement, a Fund could experience both delays in liquidating the underlying
security and losses. To minimize these possibilities, each Fund intends to enter
into repurchase agreements only with its Custodian, banks having assets in
excess of $10 billion and the largest and, in the judgment of the Adviser, most
credit worthy primary U.S. Government securities dealers. Each Fund will enter
into repurchase agreements which are collateralized by U.S. Government
obligations. Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Funds' Custodian at the Federal Reserve Bank. At
the time a Fund enters into a repurchase agreement, the value of the collateral,
including accrued interest, will equal or exceed the value of the repurchase
agreement and, in the case of a repurchase agreement exceeding one day, the
seller agrees to maintain sufficient collateral so the value of the underlying
collateral, including accrued interest, will at all times equal or exceed the
value of the repurchase agreement. A Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result
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thereof, more than 15% of the value of the net assets of the Fund would be
invested in such securities and other illiquid securities.
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as
a primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when portfolio changes are deemed necessary or
appropriate by the Adviser. Although the annual portfolio turnover rate of the
Funds cannot be accurately predicted, it is not expected to exceed 100% with
respect to either of the Funds, but may be either higher or lower. A 100%
turnover rate would occur, for example, if all the securities of a Fund were
replaced once in a one-year period. High turnover involves correspondingly
greater commission expenses and transaction costs and may result in a Fund
recognizing greater amounts of income and capital gains, which would increase
the amount of income and capital gains which the Fund must distribute to
shareholders in order to maintain its status as a regulated investment company
and to avoid the imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
The initial investment in either Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). The Funds may, in the Adviser's sole
discretion, accept certain accounts with less than the stated minimum initial
investment. Investors may open an account and make an initial investment through
securities dealers having a sales agreement with the Trust's principal
underwriter, Countrywide Investments, Inc. (the "Underwriter"). Investors may
also make a direct initial investment by sending a check and a completed account
application form to Countrywide Fund Services, Inc. (the "Transfer Agent"), P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to either
the "Equity Fund" or the "Balanced Fund". Third party checks will not be
accepted. An account application is included in this Prospectus. Additional
shares may be purchased through the Open Account Program described below.
Shares of each Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Underwriter by 5:00 p.m., Eastern time, that
day are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Underwriter by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent by 4:00 p.m., Eastern time, are confirmed
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at that day's public offering price. Direct investments received by the Transfer
Agent after 4:00 p.m., Eastern time, and orders received from dealers after 5:00
p.m., Eastern time, are confirmed at the public offering price next determined
on the following business day.
The public offering price of shares of the Funds is the next determined
net asset value per share plus a sales load as shown in the following table.
DEALER
REALLOWANCE
SALES LOAD AS % OF: AS % OF
PUBLIC NET PUBLIC
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT PRICE INVESTED PRICE
Less than $25,000 5.00% 5.00% 4.50%
$25,000 but less than $250,000 4.00 4.00 3.50
$250,000 or more 3.00 3.00 2.50
Under certain circumstances, the Underwriter may increase or decrease
the reallowance to dealers. Dealers engaged in the sale of shares of the Funds
may be deemed to be underwriters under the Securities Act of 1933. The
Underwriter retains the entire sales load on all direct initial investments in
Funds and on all investments in the Funds and all investments in accounts with
no designated dealer of record.
The Trust mails investors a confirmation of each purchase or redemption
of Fund shares. Certificates representing shares are not issued. The Trust and
the Underwriter reserve the right to limit the amount of investments and to
refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Underwriter, the Transfer Agent and
certain of their affiliates, excluding such entities from certain liabilities
(including, among others, losses resulting from unauthorized shareholder
transactions) relating to the various services (for example, telephone
exchanges) made available to investors.
Should an order to purchase shares be canceled because the check does
not clear, the investor will be responsible for any resulting losses or fees
incurred by the Trust or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or telephone
number listed below.
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After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Funds over a period of years and permits the
automatic reinvestment of dividends and distributions of the Funds in additional
shares. Reinvestment of dividends and distributions in additional shares will be
made without a sales load.
Under the Open Account Program, the investor may purchase and add
shares to his or her account at any time either through a securities dealer or
by sending a check to the Lake Shore Family of Funds, P.O. Box 5354, Cincinnati,
Ohio 45201-5354. The check should be made payable to the applicable Fund.
Under the Open Account Program, investors may also purchase shares of
the Funds by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 888-___-____) for instructions. The bank may impose a charge for
sending the wire. There is presently no fee for receipt of wired funds, but the
Trust reserves the right to charge shareholders for this service upon thirty
days' prior notice to shareholders.
Each additional purchase request must contain the name of the account
and the account number to permit proper crediting to the account. While there is
no minimum amount required for subsequent investments, the Trust reserves the
right to impose such a requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by the Trust. If a broker-dealer received concessions for selling
shares of the Funds to a current shareholder, such broker-dealer will receive
the concessions described above with respect to additional investments by the
shareholder.
REDUCED SALES LOAD. A "purchaser" (defined below) may use the Right of
Accumulation to combine the cost or current net asset value (whichever is
higher) of his existing shares of any Fund in the Lake Shore Family of Funds
with the amount of his or her current purchases in order to take advantage of
the reduced sales loads set forth in the table above. Purchases made pursuant to
a Letter of Intent may also be eligible for the reduced sales loads. The minimum
initial investment under a Letter of Intent is $10,000. Shareholders should
contact the Transfer Agent for information about the Right of Accumulation and
Letter of Intent.
PURCHASES AT NET ASSET VALUE. An investor may purchase shares of either
Fund at net asset value when the payment for the investment represents the
proceeds from the redemption of shares of any other mutual fund which has a
front-end sales load and is not distributed by the Underwriter. The investment
will qualify for this provision if the purchase price of the shares of the
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other fund included a front-end sales load and the redemption occurred within
one year of the purchase of such shares and no more than sixty days prior to
purchase of shares of the Funds. To make a purchase at net asset value pursuant
to this provision, the investor must submit photocopies of the confirmations (or
similar evidence) showing the purchase and redemption of shares of the other
fund. The payment may be made with the redemption check representing the
proceeds of the shares redeemed, endorsed to the order of the applicable Fund.
The redemption of shares of the other fund is, for federal income tax purposes,
a sale on which the investor may realize a gain or loss. These provisions may be
modified or terminated at any time. Shareholders should contact their securities
dealer or the Trust for further information.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase shares of
the Funds at net asset value. To the extent permitted by regulatory authorities,
a bank trust department may charge fees to clients for whose account it
purchases shares at net asset value. Federal and state credit unions may also
purchase shares at net asset value.
In addition, shares of the Funds may be purchased at net asset value by
broker-dealers who have a sales agreement with the Underwriter, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisers and financial planners may also purchase
shares of the Funds at net asset value if their investment adviser or financial
planner has made arrangements to permit them to do so with the Trust and the
Underwriter. The investment adviser or financial planner must notify the
Transfer Agent that an investment qualifies as a purchase at net asset value.
Trustees, directors, officers and employees of the Trust, the Adviser,
the Underwriter or the Transfer Agent, including members of the immediate
families of such individuals and employee benefit plans established by such
entities, may also purchase shares of the Funds at net asset value.
ADDITIONAL INFORMATION. For purposes of determining the applicable
sales load and for purposes of the Letter of Intent and Right of Accumulation
privileges, a purchaser includes an individual, his or her spouse and their
children under the age of 21, purchasing shares for his, her or their own
account; or a trustee or other fiduciary purchasing shares for a single
fiduciary account although more than one beneficiary is involved; or employees
of a common employer, provided that economies of scale are realized through
remittances from a single source and quarterly confirmation of such purchases;
or an organized group,
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provided that the purchases are made through a central administration or a
single dealer, or by other means which result in economy of sales effort or
expense. Contact the Transfer Agent for additional information concerning
purchases at net asset value or at reduced sales loads.
SHAREHOLDER SERVICES
Contact the Transfer Agent (Nationwide call toll-free 888-___-____) for
additional information about the shareholder services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in an account have a value of at least $5,000, the
shareholder may elect to receive, or may designate another person to receive,
monthly or quarterly payments in a specified amount of not less than $50 each.
There is no charge for this service. Purchases of additional shares of the Funds
while the plan is in effect are generally undesirable because a sales load is
incurred whenever purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of either Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for
individuals and their non-employed spouses
-- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a
401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
DIRECT DEPOSIT PLANS
Shares of either Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Funds.
AUTOMATIC INVESTMENT PLAN
Shareholders may make automatic monthly investments in either Fund from
their bank, savings and loan or other depository
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institution account. The minimum initial and subsequent investments must be $50
under the plan. The Transfer Agent pays the costs associated with these
transfers, but reserves the right, upon thirty days' written notice, to make
reasonable charges for this service. A shareholder's depository institution may
impose its own charge for debiting an account which would reduce the return from
an investment in the Funds.
REINVESTMENT PRIVILEGE
If a shareholder has redeemed shares of either Fund, he or she may
reinvest all or part of the proceeds without any additional sales load. This
reinvestment must occur within ninety days of the redemption and the privilege
may only be exercised once per year.
HOW TO REDEEM SHARES
Shareholders may redeem shares of either Fund on each day that the
Trust is open for business by sending a written request to the Transfer Agent.
The request must state the number of shares or the dollar amount to be redeemed
and the account number. The request must be signed exactly as the shareholder's
name appears on the Trust's account records. If the shares to be redeemed have a
value of $25,000 or more, the shareholder's signature must be guaranteed by any
eligible guarantor institution, including banks, brokers and dealers, municipal
securities brokers and dealers, government securities brokers and dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations.
Shareholders may also redeem shares by placing a wire redemption
request through a securities broker or dealer. Unaffiliated broker-dealers may
impose a fee on the shareholder for this service. Shareholders will receive the
net asset value per share next determined after receipt by the Transfer Agent of
the wire redemption request. It is the responsibility of broker-dealers to
properly transmit wire redemption orders.
If the instructions request a redemption by wire, the shareholder will
be charged a $9 processing fee by the Funds' custodian. The Trust reserves the
right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from the shareholder's account by redemption of shares
in the account. The shareholder's bank or brokerage firm may also impose a
charge for processing the wire. In the event that wire transfer of funds is
impossible or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly
in the shareholder's account with a commercial
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<PAGE>
bank or other depository institution via an Automated Clearing House (ACH)
transaction. There is currently no charge for ACH transactions. Contact the
Transfer Agent for more information about ACH transactions.
Shares are redeemed at their net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above. Payment is normally made within three business days after
tender in such form, provided that payment in redemption of shares purchased by
check will be effected only after the check has been collected, which may take
up to fifteen days from the purchase date. To eliminate this delay, shareholders
may purchase shares of the Funds by certified check or wire.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Trust
reserves the right to require shareholders to close an account if at any time
the value of the shares in the account is less than $1,000 (based on actual
amounts invested including any sales load paid, unaffected by market
fluctuations), or $250 in the case of tax-deferred retirement plans, or such
other minimum amount as the Trust may determine from time to time. After
notification of the Trust's intention to close an account, the shareholder will
be given thirty days to increase the value of the account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
Shares of either Fund may be exchanged for shares of the other series
of the Trust at net asset value. Shareholders may
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<PAGE>
request an exchange by sending a written request to the Transfer Agent. The
request must be signed exactly as the shareholder's name appears on the Trust's
account records. Exchanges may also be requested by telephone. If a shareholder
is unable to execute a transaction by telephone (for example, during times of
unusual market activity), the shareholder should consider requesting the
exchange by mail or by visiting the Trust's offices at 403 Vine Street, 2nd
Floor, Cincinnati, Ohio 45202. An exchange will be effected at the next
determined net asset value after receipt of a request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
the shareholder's state of residence and are subject to the applicable minimum
initial investment requirements. The exchange privilege may be modified or
terminated by the Board of Trustees upon 60 days prior notice to shareholders.
An exchange results in a sale of fund shares, which may cause the shareholder to
recognize a capital gain or loss. Before making an exchange, contact the
Transfer Agent to obtain a current prospectus and more information about
exchanges among the funds.
DIVIDENDS AND DISTRIBUTIONS
Each Fund expects to distribute substantially all of its net investment
income, if any, on a quarterly basis. Each Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains
distributions reinvested in additional
shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital
gains distributions paid in cash.
The choice of option should be indicated on the application. If no option is
specified on the application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If the Income Option or the Cash Option is selected and the U.S. Postal
Service cannot deliver the checks or if the checks remain uncashed for six
months, dividends may be reinvested in the account at the then-current net asset
value and the account
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will be converted to the Share Option. No interest will accrue on amounts
represented by uncashed distribution checks.
An investor who has received in cash any dividend or capital gains
distribution from either Fund may return the distribution within thirty days of
the distribution date to the Transfer Agent for reinvestment at the net asset
value next determined after its return. The investor or his dealer must notify
the Transfer Agent that a distribution is being reinvested pursuant to this
provision.
TAXES
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. Each Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its shareholders.
Distributions of net investment income and from net realized short-term capital
gains, if any, are taxable as ordinary income. Dividends distributed by the
Funds from net investment income may be eligible, in whole or in part, for the
dividends received deduction available to corporations. Distributions of net
realized long-term capital gains are taxable as long-term capital gains
regardless of how long the shareholder has held Fund shares. Redemptions and
exchanges of shares of the Funds are taxable events on which a shareholder may
realize a gain or loss.
The Funds will mail to each of their shareholders a statement
indicating the amount and federal income tax status of all distributions made
during the year. In addition to federal taxes, shareholders of the Funds may be
subject to state and local taxes on distributions. Shareholders should consult
their tax advisers about the tax effect of distributions and withdrawals from
the Funds and the use of the Automatic Withdrawal Plan and the Exchange
Privilege. The tax consequences described in this section apply whether
distributions are taken in cash or reinvested in additional shares.
OPERATION OF THE FUNDS
The Funds are diversified series of the Lake Shore Family of Funds, an
open-end management investment company organized as an Ohio business trust on
September 3, 1997. The Board of Trustees supervises the business activities of
the Trust. Like other mutual funds, the Trust retains various organizations to
perform specialized services for the Funds.
The Trust retains Lake Shore Fund Group, Ltd. (the "Adviser"), 403
Vine Street, 2nd Floor, Cincinnati, Ohio to manage
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<PAGE>
the Funds' investments. The controlling shareholders of the Adviser are
Earl V. (Buck) Newsome, Jr. and Gregory J. Bauer. The Adviser has not previously
provided investment advisory services to a registered investment company. Each
Fund pays the Adviser a fee for its services equal to the annual rate of 1.00%
the average value of its daily net assets. As of the date of this Prospectus,
the Adviser is the sole shareholder of each Fund.
Earl V. (Buck) Newsome, Jr., Gregory J. Bauer and Robert A. McLaughlin
are primarily responsible for managing the portfolio of the Equity Fund and the
Balanced Fund. [background of portfolio managers to be inserted]
The Funds are responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Funds may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto.
Countrywide Investments, Inc. (the "Underwriter"), 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202, serves as principal underwriter for the
Funds and, as such, is the exclusive agent for the distribution of shares of the
Funds. The Underwriter is a wholly-owned indirect subsidiary of Countrywide
Credit Industries, Inc., a New York Stock Exchange listed company principally
engaged in residential mortgage lending.
The Trust retains Countrywide Fund Services, Inc. (the "Transfer
Agent"), P.O. Box 5354, Cincinnati, Ohio 45201-5354, an indirect wholly-owned
subsidiary of Countrywide Credit Industries, Inc., to serve as the Funds'
transfer agent, dividend paying agent and shareholder servicing agent.
The Transfer Agent also provides accounting and pricing services to the
Funds. The Transfer Agent receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
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<PAGE>
In addition, the Transfer Agent has been retained to provide
administrative services to the Funds. In this capacity, the Transfer Agent
supplies executive, administrative and regulatory services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and Exchange
Commission and state securities authorities. Each Fund pays the Transfer Agent a
fee for these administrative services at the annual rate of .15% of the average
value of its daily net assets up to $50,000,000, .125% of such assets from
$50,000,000 to $100,000,000 and .10% of such assets in excess of $100,000,000;
provided, however, that the minimum fee is $1,000 per month with respect to each
Fund.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to sales
of shares of the Funds as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Funds. Subject to the requirements of the
Investment Company Act of 1940 (the "1940 Act") and procedures adopted by the
Board of Trustees, the Funds may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Trust, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Trust, the Adviser or the Underwriter.
Shares of each Fund have equal voting rights and liquidation rights,
and are voted in the aggregate and not by Fund except in matters where a
separate vote is required by the 1940 Act or when the matter affects only the
interests of a particular Fund. When matters are submitted to shareholders for a
vote, each shareholder is entitled to one vote for each full share owned and
fractional votes for fractional shares owned. The Trust does not normally hold
annual meetings of shareholders. The Trustees shall promptly call and give
notice of a meeting of shareholders for the purpose of voting upon the removal
of any Trustee when requested to do so in writing by shareholders holding 10% or
more of the Trust's outstanding shares. The Trust will comply with the
provisions of Section 16(c) of the 1940 Act in order to facilitate
communications among shareholders.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted a
plan of distribution (the "Plan") under which the Funds may directly incur or
reimburse the Adviser for certain distribution-related expenses, including
payments to securities dealers and others who are engaged in the sale of shares
of the Funds and who may be advising investors regarding the purchase,
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<PAGE>
sale or retention of Fund shares; expenses of maintaining personnel who engage
in or support distribution of shares or who render shareholder support services
not otherwise provided by the Transfer Agent; expenses of formulating and
implementing marketing and promotional activities, including direct mail
promotions and mass media advertising; expenses of preparing, printing and
distributing sales literature and prospectuses and statements of additional
information and reports for recipients other than existing shareholders of the
Funds; expenses of obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Trust may, from time to time,
deem advisable; and any other expenses related to the distribution of the Funds'
shares.
The annual limitation for payment of expenses pursuant to the Plan is
.25% of each Fund's average daily net assets. Unreimbursed expenditures will not
be carried over from year to year. In the event the Plan is terminated by either
Fund in accordance with its terms, that Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
Pursuant to the Plan, the Funds may also make payments to banks or
other financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass- Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Funds may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for a Fund, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges -
front-end load, 12b-1 fees or contingent deferred load - terminate when a
percentage of gross sales is reached.
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<PAGE>
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Trust is open for business, the public offering
price (net asset value plus applicable sales load) of shares of each of the
Funds is determined as of the close of the regular session of trading on the New
York Stock Exchange, currently 4:00 p.m., Eastern time. The Trust is open for
business on each day the New York Stock Exchange is open for business and on any
other day when there is sufficient trading in a Fund's investments that its net
asset value might be materially affected. The net asset value per share of each
Fund is calculated by dividing the sum of the value of the securities held by
the Fund plus cash or other assets minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding of the Fund, rounded
to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices
as obtained from one or more of the major market makers for such securities.
Other portfolio securities are valued as follows: (i) securities which are
traded on stock exchanges or are quoted by NASDAQ are valued at the last
reported sale price as of the close of the regular session of trading on the New
York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price, (ii) securities traded in
the over-the-counter market, and which are not quoted by NASDAQ, are valued at
the last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of each Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
From time to time, each Fund may advertise its "average annual total
return." Each Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future performance.
The "average annual total return" of a Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which
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<PAGE>
periods will be stated in the advertisement) that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of "average annual total return" assumes the
reinvestment of all dividends and distributions and the deduction of the current
maximum sales load from the initial investment. A Fund may also advertise total
return (a "nonstandardized quotation") which is calculated differently from
"average annual total return." A nonstandardized quotation of total return may
be a cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions. A
nonstandardized quotation of total return may also indicate average annual
compounded rates of return over periods other than those specified for "average
annual total return." These nonstandardized returns do not include the effect of
the applicable sales load which, if included, would reduce total return. A
nonstandardized quotation of total return will always be accompanied by a Fund's
"average annual total return" as described above.
The "yield" of a Fund is computed by dividing the net investment income
per share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, the Funds may advertise their performance rankings
as published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK,
BARRON'S, FORTUNE or MORNINGSTAR MUTUAL FUND VALUES. The Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index. In connection with a ranking, the Funds may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Funds may also present their performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Adviser's view of current or past market conditions or historical trends.
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<PAGE>
LAKE SHORE FAMILY OF FUNDS
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
BOARD OF TRUSTEES
Earl V. (Buck) Newsome, Jr.
Gregory J. Bauer
Robert A. McLaughlin
Francis A. Kovacs, Jr.
===============================================================================
INVESTMENT ADVISER
LAKE SHORE FUND GROUP, LTD
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
UNDERWRITER
COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
Nationwide: (Toll-Free) 888-___-____
Cincinnati: 513-___-_____
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<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
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<PAGE>
LAKE SHORE FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
__________, 1997
Equity Fund
Balanced Fund
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the Lake Shore Family of Funds
dated ________________. A copy of the Funds' Prospectus can be obtained by
writing the Trust at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202, or
by calling the Trust nationwide toll-free ____________.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Lake Shore Family of Funds
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
TABLE OF CONTENTS
THE TRUST................................................................ 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS............................ 3
INVESTMENT LIMITATIONS................................................... 7
TRUSTEES AND OFFICERS.................................................... 9
THE INVESTMENT ADVISER................................................... 11
THE UNDERWRITER.......................................................... 12
DISTRIBUTION PLAN........................................................ 12
SECURITIES TRANSACTIONS.................................................. 13
PORTFOLIO TURNOVER....................................................... 15
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE..................... 15
OTHER PURCHASE INFORMATION............................................... 16
TAXES.................................................................... 17
REDEMPTION IN KIND....................................................... 18
HISTORICAL PERFORMANCE INFORMATION....................................... 18
CUSTODIAN................................................................ 20
AUDITORS ................................................................ 20
COUNTRYWIDE FUND SERVICES, INC........................................... 20
STATEMENTS OF ASSETS AND LIABILITIES..................................... 21
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<PAGE>
THE TRUST
The Lake Shore Family of Funds (the "Trust") was organized as an Ohio
business trust on September 3, 1997. The Trust currently offers two series of
shares to investors: the Equity Fund and the Balanced Fund (referred to
individually as a "Fund" and collectively as the "Funds"). Each Fund has its own
investment objective and policies.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objectives and Policies")
appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
either Fund) means the lesser of (1) 67% or more of the outstanding shares of
the Trust (or the applicable Fund) present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust (or the applicable Fund) are
present or represented at such meeting or (2) more than 50% of the outstanding
shares of the Trust (or the applicable Fund).
COMMERCIAL PAPER. Commercial paper consists of short-term usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. Each Fund will only
invest in commercial
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<PAGE>
paper rated A-1 or A-2 by Standard & Poor's Ratings Group ("S&P") or Prime-1 or
Prime-2 by Moody's Investors Service, Inc. ("Moody's") or which, in the opinion
of Lake Shore Fund Group, Ltd. (the "Adviser") is of equivalent investment
quality. Certain notes may have floating or variable rates. Variable and
floating rate notes with a demand notice period exceeding seven days will be
subject to each Fund's restrictions on illiquid investments (see "Investment
Limitations") unless, in the judgment of the Adviser, subject to the direction
of the Board of Trustees, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1 or Prime-2. Commercial paper rated A-1
(highest quality) by S&P has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's industry is well established and the issuer has a strong
position within the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-1 or A-2.
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or of banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face
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<PAGE>
amount of the instrument upon maturity. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time at a
stated interest rate. Investments in time deposits maturing in more than seven
days will be subject to each Fund's restrictions on illiquid investments (see
"Investment Limitations").
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which
a Fund purchases a security and simultaneously commits to resell that security
to the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit quality at least
equal to a Fund's investment criteria for portfolio securities and will be held
by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Fund to the seller subject to the
repurchase agreement and is therefore subject to that Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Fund subject to a repurchase agreement
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<PAGE>
as being owned by that Fund or as being collateral for a loan by the Fund to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the security
under a repurchase agreement, a Fund may encounter delay and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the security. If a court characterized the transaction as a loan and
a Fund has not perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case a Fund may
incur a loss if the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund involved will direct the seller of the
security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
STRIPS. STRIPS are U.S. Treasury bills, notes, and bonds that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such U.S. Treasury securities, and
receipts or certificates representing interests in such stripped U.S. Treasury
securities and coupons. A STRIPS security pays no interest in cash to its holder
during its life although interest is accrued for federal income tax purposes.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value. Investing in STRIPS may help
to preserve capital during periods of declining interest rates.
STRIPS do not entitle the holder to any periodic payments of interest
prior to maturity. Accordingly, such securities usually trade a deep discount
from their face or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt obligations of
comparable maturities which make periodic distributions of interest. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, STRIPS eliminate the reinvestment
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<PAGE>
risk and lock in a rate of return to maturity. Current federal tax law requires
that a holder of a STRIPS security accrue a portion of the discount at which the
security was purchased as income each year even though the holder received no
interest payment in cash on the security during the year.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the value of the loaned
securities. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by a Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund. The
Funds receive amounts equal to the dividends or interest on loaned securities
and also receive one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be shared with the
borrower. The Funds may also pay fees to placing brokers as well as custodian
and administrative fees in connection with loans. Fees may only be paid to a
placing broker provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services rendered, that the
Trustees separately consider the propriety of any fee shared by the placing
broker with the borrower, and that the fees are not used to compensate the
Adviser or any affiliated person of the Trust or an affiliated person of the
Adviser or other affiliated person. The terms of the Funds' loans must meet
applicable tests under the Internal Revenue Code and permit the Funds to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in each Fund. These limitations may
not be changed with respect to either Fund without the affirmative vote of a
majority of the outstanding shares of that Fund.
1. BORROWING MONEY. The Fund will not borrow money, except from a bank,
provided that immediately after such borrowing there is asset coverage of 300%
for all borrowings of the Fund. The Fund will not make any borrowing which would
cause its outstanding borrowings to exceed one-third of the value of its total
assets.
2. PLEDGING. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by
the Fund except as may be necessary in connection with borrowings described in
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<PAGE>
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. MARGIN PURCHASES. The Fund will not purchase any securities or
evidences of interest thereon on "margin" (except such short-term credits as
are necessary for the clearance of transactions).
4. OPTIONS. The Fund will not purchase or sell puts, calls, options,
futures, straddles, commodities or commodities futures contracts.
5. REAL ESTATE. The Fund will not purchase, hold or deal in real estate
or real estate mortgage loans, except that a Fund may purchase (a) securities of
companies (other than limited partnerships) which deal in real estate or (b)
securities which are secured by interests in real estate.
6. SHORT SALES. The Fund will not make short sales of securities, or
maintain a short position, other than short sales "against the box."
7. MINERAL LEASES. The Fund will not purchase oil, gas or other
mineral leases or exploration or development programs.
8. UNDERWRITING. The Fund will not act as underwriter of securities
issued by other persons, either directly or through a majority owned subsidiary.
This limitation is not applicable to the extent that, in connection with the
disposition of its portfolio securities (including restricted securities), the
Fund may be deemed an underwriter under certain federal securities laws.
9. ILLIQUID INVESTMENTS. The Fund will not purchase securities which
cannot be readily resold to the public because of legal or contractual
restrictions on resale or for which no readily available market exists or engage
in a repurchase agreement maturing in more than seven days if, as a result
thereof, more than 15% of the value of the Fund's net assets would be invested
in such securities.
10. CONCENTRATION. The Fund will not invest 25% or more of its total
assets in the securities of issuers in any particular industry; provided,
however, that there is no limitation with respect to investments in obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements with respect thereto.
11. INVESTING FOR CONTROL. The Fund will not invest in companies for
the purpose of exercising control.
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<PAGE>
12. SENIOR SECURITIES. The Fund will not issue or sell any senior
security. This limitation is not applicable to short-term credit obtained by
the Fund for the clearance of purchases and sales or redemptions of securities.
13. LOANS. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation, the term "loans" shall not include the purchase of
bonds, debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness.
With respect to the percentages adopted by the Trust as maximum
limitations on each Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money and the holding of illiquid securities) will not be a
violation of the policy or restriction unless the excess results immediately and
directly from the acquisition of any security or the action taken.
The Trust does not intend to pledge, mortgage or hypothecate the assets
of any Fund. The Fund does not intend to make short sales of securities "against
the box" as described in investment limitation 6. The statements of intention in
this paragraph reflect nonfundamental policies which may be changed by the Board
of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
COMPENSATION
NAME AGE POSITION HELD FROM THE TRUST
- ---- --- ------------- --------------
<S> <C> <C> <C>
*Earl V.(Buck) Newsome,Jr. 41 President/Trustee $ 0
*Gregory J. Bauer 44 Trustee 0
*Robert A. McLaughlin 58 Trustee 0
+Francis A. Kovacs, Jr. 44 Trustee 1,000
+______________________ __ Trustee _________
Robert G. Dorsey 40 Vice President 0
Mark J. Seger 35 Treasurer 0
John F. Splain 41 Secretary 0
</TABLE>
* Messrs. Newsome, Bauer and McLaughlin, as affiliated persons of Lake
Shore Fund Group, Ltd., the Trust's investment adviser, are "interested
persons" of the Trust within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
+ Member of Audit Committee.
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<PAGE>
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
EARL V.(BUCK) NEWSOME, JR., 403 Vine Street, 2nd Floor, Cincinnati,
Ohio 45202, is Managing Director of Lake Shore Fund Group, Ltd. (the investment
adviser to the Trust). He is also President of Cambridge Financial Group, Inc.
(a registered investment adviser) and has served in that capacity since 1991.
GREGORY J.BAUER, 1650 Lake Shore Drive, Suite 280, Columbus, Ohio
43204-4895, is President of Lake Shore Fund Group, Ltd. He is also Managing
Director of Cambridge Financial, Inc. and has been with Cambridge since 1986.
ROBERT A. MCLAUGHLIN, 1650 Lake Shore Drive, Suite 280, Columbus, Ohio
43204-4895, is Executive Vice President and a director of Lake Shore Fund Group,
Ltd. He is also Executive Vice President and a director of Cambridge Financial
Group, Inc. Prior to joining Cambridge in 1996, Mr. McLaughlin served as
retirement system investment officer and assistant director of the Ohio Public
Employees Retirement System.
FRANCIS A. KOVACS, JR., 155 East Broad Street, 16th Floor, Columbus,
Ohio 43215-3617 is a partner with Coolidge, Wall, Womsley & Lombard Co., L.P.A.
Previously, he was a partner at Schottenstein, Zox & Dunn from June, 1992
through March, 1995.
[remaining Trustees to be inserted]
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio 45202, is
President and Treasurer of Countrywide Fund Services, Inc. (a registered
transfer agent) and Treasurer of Countrywide Investments, Inc. (a registered
broker-dealer and investment adviser and the Funds' principal underwriter) and
Countrywide Financial Services, Inc. (a financial services company and parent of
Countrywide Fund Services, Inc. and Countrywide Investments, Inc.). He is also
Vice President of Brundage, Story and Rose Investment Trust, PRAGMA Investment
Trust, Markman MultiFund Trust, Dean Family of Funds, The New York State
Opportunity Funds, Maplewood Investment Trust, Wells Family of Real Estate Funds
and Assistant Vice President of Interactive Investments, Schwartz Investment
Trust, The Tuscarora Investment Trust, Williamsburg Investment Trust and The
Gannett Welsh & Kotler Funds (all of which are registered investment companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio 45202, is
Vice President of Countrywide Financial Services, Inc. and Vice President
and Chief Operating Officer of Countrywide Fund Services, Inc. He is also
Treasurer of Countrywide Investment Trust, Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust,
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<PAGE>
Markman MultiFund Trust, PRAGMA Investment Trust, Williamsburg Investment Trust,
The New York State Opportunity Funds, Maplewood Investment Trust, Dean Family of
Funds and Wells Family of Real Estate Funds, Assistant Treasurer of Interactive
Investments, Schwartz Investment Trust, The Tuscarora Investment Trust and The
Gannett Welsh & Kotler Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio 45202, is Secretary
and General Counsel of Countrywide Fund Services, Inc., Countrywide Investments,
Inc. and Countrywide Financial Services, Inc. He is also Secretary of
Countrywide Investment Trust, Countrywide Tax-Free Trust, Countrywide Strategic
Trust, Brundage, Story and Rose Investment Trust, Markman MultiFund Trust, The
Tuscarora Investment Trust, Williamsburg Investment Trust, PRAGMA Investment
Trust, Dean Family of Funds, Maplewood Investment Trust and Wells Family of Real
Estate Funds and Assistant Secretary of Interactive Investments, Schwartz
Investment Trust, The New York State Opportunity Funds and The Gannett Welsh &
Kotler Funds.
Each non-interested Trustee will receive a $250 fee for each Board
meeting attended and will be reimbursed for travel and other expenses incurred
in the performance of their duties.
THE INVESTMENT ADVISER
Lake Shore Fund Group, Ltd. (the "Adviser") is the Funds' investment
manager. Earl V. (Buck) Newsome, Jr. and Gregory J. Bauer, who are Trustees
of the Trust, are the controlling shareholders of the Adviser. Mr. Newsome
and Mr. Bauer, by reason of such affiliation, may directly or indirectly
receive benefits from the advisory fees paid to the Adviser.
Under the terms of the advisory agreement between the Trust and the
Adviser, the Adviser manages the Funds' investments. Each Fund pays the Adviser
a fee computed and accrued daily and paid monthly at an annual rate of 1.00% of
its average daily net assets.
The Funds are responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Funds, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Trust may be a party. The Funds may have an
obligation to indemnify the Trust's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The compensation and expenses of any officer,
Trustee or employee of the Trust who is an officer, director, employee or
stockholder of the Adviser are paid by the Adviser.
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<PAGE>
By its terms, the Trust's advisory agreement will remain in force until
_____________ and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of a Fund's outstanding
voting securities; provided that in either event continuance is also approved by
a majority of the Trustees who are not interested persons of the Trust, by a
vote cast in person at a meeting called for the purpose of voting such approval.
The Trust's investment advisory agreement may be terminated at any time, on
sixty days' written notice, without the payment of any penalty, by the Board of
Trustees, by a vote of the majority of a Fund's outstanding voting securities,
or by the Adviser. The investment advisory agreement automatically terminates in
the event of its assignment, as defined by the Investment Company Act of 1940
and the rules thereunder.
THE UNDERWRITER
Countrywide Investments, Inc. (the "Underwriter") is the principal
underwriter of the Funds and, as such, is the exclusive agent for distribution
of shares of the Funds. The Underwriter is obligated to sell the shares on a
best efforts basis only against purchase orders for the shares. Shares of each
Fund are offered to the public on a continuous basis.
The Underwriter currently allows concessions to dealers who sell shares
of the Funds. The Underwriter receives that portion of the sales load which is
not reallowed to the dealers who sell shares of the Funds. The Underwriter
retains the entire sales load on all direct initial investments in the Funds and
on all investments in accounts with no designated dealer of record. The
Underwriter bears promotional expenses in connection with the distribution of
the Funds' shares to the extent that such expenses are not assumed by the Funds
under their plan of distribution.
The Funds may compensate dealers, including the Underwriter and its
affiliates, based on the average balance of all accounts in the Funds for which
the dealer is designated as the party responsible for the account. See
"Distribution Plan" below.
DISTRIBUTION PLAN
As stated in the Prospectus, each Fund has adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 which permits each Fund to pay for expenses incurred in the
distribution and promotion of its shares, including but not limited to, the
printing of prospectuses, statements of additional information and reports used
for sales purposes, advertisements, expenses of preparation and printing of
sales literature, promotion, marketing and sales expenses, and other
distribution-related expenses, including any
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<PAGE>
distribution fees paid to securities dealers or other firms who have executed a
distribution or service agreement with the Underwriter. The Plan expressly
limits payment of the distribution expenses listed above in any fiscal year to a
maximum of .25% of the average daily net assets of the Fund.
The continuance of the Plan must be specifically approved at least
annually by a vote of the Trust's Board of Trustees and by a vote of the
Trustees who are not interested persons of the Trust and have no direct or
indirect financial interest in the Plan (the "Independent Trustees") at a
meeting called for the purpose of voting on such continuance. The Plan may be
terminated by either Fund at any time by a vote of a majority of the Independent
Trustees or by a vote of the holders of a majority of the outstanding shares of
such Fund. In the event the Plan is terminated in accordance with its terms, a
Fund will not be required to make any payments for expenses incurred by the
Advisor after the termination date. The Plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Plan must be approved by a vote of the Trust's
Board of Trustees and by a vote of the Independent Trustees.
In approving the Plan, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plan will benefit each Fund and its
shareholders. The Board of Trustees believes that expenditure of the Funds'
assets for distribution expenses under the Plan should assist in the growth of
the Funds which will benefit each Fund and its shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Funds' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Funds pursuant
to the Plan and the purposes for which such expenditures were made must be
reported quarterly to the Board of Trustees for its review. In addition, the
selection and nomination of those Trustees who are not interested persons of the
Trust are committed to the discretion of the Independent Trustees during such
period.
By reason of their ownership of shares of the Adviser, Earl V. (Buck)
Newsome, Jr. and Gregory J. Bauer may each be deemed to have a financial
interest in the operation of the Plan.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Funds and the placing
of the Funds' securities transactions and negotiation of
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<PAGE>
commission rates where applicable are made by the Adviser and are subject to
review by the Board of Trustees of the Trust. In the purchase and sale of
portfolio securities, the Adviser seeks best execution for the Funds, taking
into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer. The Adviser generally seeks favorable
prices and commission rates that are reasonable in relation to the benefits
received.
The Funds may attempt to deal directly with the dealers who make a
market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer.
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Funds and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Adviser determines in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided. The determination
may be viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Underwriter and other
affiliates of the Trust or the Adviser may effect securities transactions which
are executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. No Fund will effect any
brokerage transactions in its portfolio securities with the Adviser if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-
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<PAGE>
dealers. Although the Funds do not anticipate any ongoing arrangements with
other brokerage firms, brokerage business may be transacted from time to time
with other firms. Neither the Underwriter nor affiliates of the Trust or the
Adviser will receive reciprocal brokerage business as a result of the brokerage
business transacted by the Funds with other brokers.
CODE OF ETHICS. The Trust and the Adviser have each adopted a Code of
Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Code
significantly restricts the personal investing activities of all employees of
the Adviser. No employee may purchase or sell any security which at the time is
being purchased or sold (as the case may be), or to the knowledge of the
employee, is being considered for purchase or sale by any Fund.
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that each Fund's portfolio turnover rate normally
will not exceed 100%. A 100% turnover rate would occur if all of a Fund's
portfolio securities were replaced once within a one year period.
Generally, each Fund intends to invest for long-term purposes. However,
the rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when the Adviser believes that portfolio
changes are appropriate.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
The share price (net asset value) and the public offering price (net
asset value plus applicable sales load) of the shares of each Fund are
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each day the Trust is
open for business. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Trust may also be open for business on
other days in which there is sufficient trading in a Fund's portfolio securities
that its net asset value might be materially affected. For a description of the
methods used to determine the share price and the public offering price, see
"Calculation of Share Price and Public Offering Price" in the Prospectus.
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<PAGE>
OTHER PURCHASE INFORMATION
The Prospectus describes generally how to purchase shares of the Funds.
Additional information with respect to certain types of purchases of shares of
the Funds is set forth below.
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
shares of a Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing shares of any Fund in the Lake Shore
Family of Funds with the amount of his current purchases in order to take
advantage of the reduced sales loads set forth in the tables in the Prospectus.
The purchaser or his dealer must notify Countrywide Fund Services, Inc. (the
"Transfer Agent") that an investment qualifies for a reduced sales load. The
reduced sales load will be granted upon confirmation of the purchaser's holdings
by the Transfer Agent.
LETTER OF INTENT. The reduced sales loads set forth in the tables in
the Prospectus may also be available to any "purchaser" (as defined in the
Prospectus) of shares of a Fund who submits a Letter of Intent to the Transfer
Agent. The Letter must state an intention to invest in any Fund in the Lake
Shore Family of Funds within a thirteen month period a specified amount which,
if made at one time, would qualify for a reduced sales load. A Letter of Intent
may be submitted with a purchase at the beginning of the thirteen month period
or within ninety days of the first purchase under the Letter of Intent. Upon
acceptance of this Letter, the purchaser becomes eligible for the reduced sales
load applicable to the level of investment covered by such Letter of Intent as
if the entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Trust to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales load will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
load). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
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<PAGE>
OTHER INFORMATION. The Trust does not impose a sales load or imposes a
reduced sales load in connection with purchases of shares of the Funds made
under the reinvestment privilege or the purchases described in the "Reduced
Sales Load" or "Purchases at Net Asset Value" sections in the Prospectus because
such purchases require minimal sales effort by the Underwriter. Purchases
described in the "Purchases at Net Asset Value" section may be made for
investment only, and the shares may not be resold except through redemption by
or on behalf of the Trust.
TAXES
The Prospectus describes generally the tax treatment of distributions
by the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. To so qualify a Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income (including but
not limited to gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or currencies; and
(ii) diversify its holdings so that at the end of each quarter of its taxable
year the following two conditions are met: (a) at least 75% of the value of the
Fund's total assets is represented by cash, U.S. Government securities,
securities of other regulated investment companies and other securities (for
this purpose such other securities will qualify only if the Fund's investment is
limited in respect to any issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer) and (b) not
more than 25% of the value of the Fund's assets is invested in securities of any
one issuer (other than U.S. Government securities or securities of other
regulated investment companies).
A Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carries forward. Capital losses may be carried forward to offset
any capital gains for eight years, after which any undeducted capital loss
remaining is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized
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<PAGE>
during the one year period ending on October 31 of the calendar year plus
undistributed amounts from prior years. The Funds intend to make distributions
sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of a Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Funds to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of each Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
From time to time, each Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment
of all dividends and distributions and the deduction of the current maximum
sales load from the initial $1,000 payment. If a Fund has been in existence less
than one, five or ten years, the time period since the date of the initial
public offering of shares will be substituted for the periods stated. Each Fund
may also advertise total return (a "non-standardized quotation") which is
calculated differently from average annual
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<PAGE>
total return. A nonstandardized quotation of total return may be a cumulative
return which measures the percentage change in the value of an account between
the beginning and end of a period, assuming no activity in the account other
than reinvestment of dividends and capital gains distributions. This computation
does not include the effect of the applicable sales load which, if included,
would reduce total return. A nonstandardized quotation may also indicate average
annual compounded rates of return without including the effect of the applicable
sales load or over periods other than those specified for average annual total
return. A nonstandardized quotation of total return will always be accompanied
by the Fund's average annual total return as described above.
From time to time, each of the Funds may advertise its yield. A yield
quotation is based on a 30-day (or one month) period and is computed by dividing
the net investment income per share earned during the period by the maximum
offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b/cd +1)6 -1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that a Fund
owns the security. Generally, interest earned (for the purpose of "a" above) on
debt obligations is computed by reference to the yield to maturity of each
obligation held based on the market value of the obligation (including actual
accrued interest) at the close of business on the last business day prior to the
start of the 30-day (or one month) period for which yield is being calculated,
or, with respect to obligations purchased during the month, the purchase price
(plus actual accrued interest). With respect to the treatment of discount and
premium on mortgage or other receivables-backed obligations which are expected
to be subject to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an increase or
decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding each Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements
- 19 -
<PAGE>
may also compare performance (using the calculation methods set forth in the
Prospectus) to performance as reported by other investments, indices and
averages. When advertising current ratings or rankings, the Funds may use the
following publications or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis measures total return for the
mutual fund industry and ranks individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
loads. In addition, the Funds may use comparative performance information
appearing in relevant indices, including the Standard & Poor's 500 Index (the
"S&P 500 Index") and the Dow Jones Industrial Average. The S&P 500 Index is an
unmanaged index of 500 stocks, the purpose of which is to portray the pattern of
common stock price movement. The Dow Jones Industrial Average is a measurement
of general market price movement for 30 widely held stocks listed on the New
York Stock Exchange.
In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
their performance. In addition, there can be no assurance that the Funds will
continue this performance as compared to such other averages.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, has been retained
to act as Custodian for the Funds' investments. Star Bank acts as each Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
AUDITORS
The firm of Joseph Decosimo and Company PLL has been selected as
independent auditors for the Trust for the fiscal year ending December 31, 1998.
Joseph Decosimo and Company performs an annual audit of the Trust's financial
statements and advises the Trust as to certain accounting matters.
COUNTRYWIDE FUND SERVICES, INC.
The Trust's transfer agent, Countrywide Fund Services, Inc. (the
"Transfer Agent"), maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Funds' shares, acts as dividend and distribution disbursing
agent and
- 20 -
<PAGE>
performs other shareholder service functions. The Transfer Agent receives for
its services as transfer agent a fee at an annual rate of $20 per account from
each of the Funds, provided, however, that the minimum fee is $1,200 per month
for each Fund. In addition, the Funds pay out-of-pocket expenses, including but
not limited to, postage, envelopes, checks, drafts, forms, reports, record
storage and communication lines.
The Transfer Agent also provides accounting and pricing services to the
Funds. For calculating daily net asset value per share and maintaining such
books and records as are necessary to enable the Transfer Agent to perform its
duties, each Fund will pay the Transfer Agent a fee in accordance with the
following schedule:
AVERAGE MONTHLY NET ASSETS MONTHLY FEE
$ 0 - $ 50,000,000 $2,000
50,000,000 - 100,000,000 2,500
100,000,000 - 200,000,000 3,000
200,000,000 - 300,000,000 4,000
Over 300,000,000 5,000 + .001%
of average monthly
net assets
In addition, each Fund pays all costs of external pricing services.
The Transfer Agent also provides administrative services to the Funds.
In this capacity, the Transfer Agent supplies non-investment related statistical
and research data, internal regulatory compliance services and executive and
administrative services. The Transfer Agent supervises the preparation of tax
returns, reports to shareholders of the Funds, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, each Fund pays the Transfer Agent a fee at the annual
rate of .15% of the average value of its daily net assets up to $50 million,
.125% of such assets from $50 million to $100 million and .10% of such assets in
excess of $100 million, provided, however, that the minimum fee is $1,000 per
month for each Fund.
STATEMENTS OF ASSETS AND LIABILITIES
The Funds' Statements of Assets and Liabilities as of ________, 1998,
which have been audited by Joseph DeCosimo and Company, are attached to this
Statement of Additional Information.
- 21 -
<PAGE>
LAKE SHORE FAMILY OF FUNDS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Financial Statements included in Part A:
None
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities,
_______________, 1997*
Notes to Statement of Assets and Liabilities*
Report of Independent Auditors*
(b) Exhibits
(1) Agreement and Declaration of Trust
(2) Bylaws
(3) Inapplicable
(4) Inapplicable
(5) Form of Advisory Agreement with Lake Shore
Fund Group, Ltd. for the Equity Fund and the
Balanced Fund
(6) Form of Underwriting Agreement with
Countrywide Investments, Inc.
(7) Inapplicable
(8) Form of Custody Agreement with Star Bank,
N.A.
(9)(i) Form of Administration Agreement with
Countrywide Fund Services, Inc.
(ii) Form of Accounting Services Agreement with
Countrywide Fund Services, Inc.
(iii) Form of Transfer, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement
with Countrywide Fund Services, Inc.
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors*
(12) Inapplicable
<PAGE>
(13) Form of Agreement Relating to Initial Capital
(14) Inapplicable
(15) Form of Plan of Distribution Pursuant to Rule
12b-1
(16) Inapplicable
(17)(i) Financial Data Schedule for Equity Fund*
(ii) Financial Data Schedule for Balanced Fund*
(18) Inapplicable
- ----------------------------------
* To be filed by Amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
After commencement of the public offering of the Registrant's
shares, the Registrant expects that no person will be directly
or indirectly controlled by or under common control with the
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of October 1, 1997, there are no holders of the shares of
beneficial interest of the Registrant.
ITEM 27. INDEMNIFICATION
Article VI of the Registrant's Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:
"SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS,
ETC. Subject to and except as otherwise provided in
the Securities Act of 1933, as amended, and the 1940
Act, the Trust shall indemnify each of its Trustees
and officers, including persons who serve at the
Trust's request as directors, officers or trustees of
another organization in which the Trust has any
interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the
defense or disposition of any
- 2 -
<PAGE>
action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or
with which such person may be or may have been
threatened, while in office or thereafter, by reason
of being or having been such a Trustee or officer,
director or trustee, and except that no Covered
Person shall be indemnified against any liability to
the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The
Trust shall advance attorneys' fees or other
expenses incurred by a Covered Person in defending
a proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act,
and Ohio Revised Code Chapter 1707, as amended.
In the event any of these laws conflict with Ohio
Revised Code Section 1701.13(E), as amended, these
laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE,
ETC. The right of indemnification provided by this
Article VI shall not be exclusive of or affect any
other rights to which any such Covered Person may be
entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors
and administrators. Nothing contained in this article
shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
- 3 -
<PAGE>
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, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant expects to maintain a standard mutual fund and
investment advisory professional and directors and officers
liability policy. The policy provides coverage to the
Registrant, its Trustees and officers, Lake Shore Fund Group,
Ltd. (the "Adviser") and Countrywide Investments, Inc.
Coverage under the policy will include losses by reason of any
act, error, omission, misstatement, misleading statement,
neglect or breach of duty.
The Advisory Agreement with the Adviser provides that the
Adviser shall not be liable for any action taken, omitted or
suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by the
Advisory Agreement, or in accordance with (or in the absence
of) specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have
resulted from the Adviser's willful misfeasance, bad faith or
gross negligence, a violation of the standard of care
established by and applicable to the Adviser in its actions
under the Advisory Agreement or breach of its duty or of its
obligations under the Advisory Agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT
ADVISER
(a) The Adviser is a registered investment adviser,
providing investment advisory services to the
Registrant. The Adviser has not previously provided
investment advisory services to a registered
investment company.
(b) The directors and officers of the Adviser and any
other business, profession, vocation or employment of
a substantial nature engaged in at any time during
the past two years:
- 4 -
<PAGE>
(i) Earl V. (Buck) Newsome, Jr. - Managing
Director and a controlling shareholder of
the Adviser. He is also President and a
controlling shareholder of Cambridge
Financial Group, Inc.
(ii) Gregory J. Bauer - President and a
controlling shareholder of the Adviser. He
is also Managing Director and a controlling
shareholder of Cambridge Financial Group,
Inc.
(iii) Robert A. McLaughlin - Executive Vice
President and a director of the Adviser and
Executive Vice President and a director of
Cambridge Financial Group, Inc. He
previously served as retirement system
investment officer and assistant director
of the Ohio Public Employees Retirement
System.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Countrywide Investments, Inc. also acts as
underwriter for the three investment companies
comprising the Countrywide Funds, namely Countrywide
Strategic Trust, Countrywide Investment Trust and
Countrywide Tax-Free Trust.
POSITION POSITION
WITH WITH
(b) NAME UNDERWRITER REGISTRANT
Angelo R. Mozilo Chairman of None
the Board
and Director
Andrew S. Bielanski Director None
Thomas H. Boone Director None
Marshall M. Gates Director None
David Sambol Director None
Robert H. Leshner President None
and Director
Sharon L. Karp Vice President None
Maryellen Peretzky Vice President None
- 5 -
<PAGE>
Susan F. Flischel Vice President- None
Investments
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer Vice
President
John J. Goetz Chief Investment None
Officer
Terrie A. Wiedenheft Chief Financial None
Officer
Scott D. Weston Assistant Vice None
President-
Investments
Michele M. Hawkins Assistant None
Vice President
Elizabeth A. Santen Assistant None
Secretary
The address of all of the above-named persons is 312
Walnut Street, Cincinnati, Ohio 45202.
(c) Inapplicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be maintained by the
Registrant at its offices located at 403 Vine Street, 2nd
Floor, Cincinnati, Ohio 45202 as well as at the offices of the
Registrant's transfer agent located at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.
ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
Inapplicable
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements which need not
be certified, within four to six months from the
effective date of this Registration Statement.
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<PAGE>
(c) The Registrant 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.
(d) The Registrant undertakes to call a meeting of
shareholders, if requested to do so by holders of
at least 10% of the Fund's outstanding shares, for
the purpose of voting upon the question of removal
of a trustee or trustees and to assist in communications
with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940.
- 7 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati and State of Ohio, on the 9th day of
October, 1997.
LAKE SHORE FAMILY OF FUNDS
By:/S/ EARL V. (BUCK) NEWSOME, JR.
Earl V. (Buck) Newsome, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ EARL V. (BUCK) NEWSOME, JR. President October 9, 1997
Earl V. (Buck) Newsome, Jr. and Trustee
/S/ MARK J. SEGER Treasurer October 9, 1997
Mark J. Seger
<PAGE>
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust
(2) Bylaws
(3) Inapplicable
(4) Inapplicable
(5) Form of Advisory Agreement
(6) Form of Underwriting Agreement
(7) Inapplicable
(8) Form of Custody Agreement
(9)(i) Form of Administration Agreement
(ii) Form of Accounting Services Agreement
(iii) Form of Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors*
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital
(14) Inapplicable
(15) Form of Plan of Distribution Pursuant to Rule 12b-1
(16) Inapplicable
(17) Financial Data Schedule*
(18) Inapplicable
- ----------------------------
* To be filed by Amendment.
<PAGE>
LAKE SHORE FAMILY OF FUNDS
AGREEMENT AND DECLARATION OF TRUST
SEPTEMBER 3, 1997
<PAGE>
LAKE SHORE FAMILY OF FUNDS
AGREEMENT AND DECLARATION OF TRUST
PAGE
ARTICLE I. NAME AND DEFINITIONS..............................1
Section 1.1 Name..............................................1
Section 1.2 Definitions.......................................1
(a) "Trust"..................................1
(b) "Trustees"...............................1
(c) "Shares".................................1
(d) "Series".................................1
(e) "Shareholder"............................2
(f) "1940 Act"...............................2
(g) "Commission".............................2
(h) "Declaration of Trust"...................2
(i) "Bylaws".................................2
ARTICLE II. PURPOSE OF TRUST..................................2
ARTICLE III. THE TRUSTEES......................................2
Section 3.1 Number, Designation, Election, Term, etc..........2
(a) Initial Trustees.........................2
(b) Number...................................2
(c) Term.....................................3
(d) Resignation and Retirement...............3
(e) Removal..................................3
(f) Vacancies................................3
(g) Effect of Death, Resignation, etc........4
(h) No Accounting............................4
Section 3.2 Powers of the Trustees............................4
(a) Investments..............................5
(b) Disposition of Assets....................5
(c) Ownership Powers.........................5
(d) Subscription.............................5
(e) Form of Holding..........................6
(f) Reorganization, etc......................6
(g) Voting Trusts, etc.......................6
(h) Compromise...............................6
(i) Partnerships, etc........................6
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<PAGE>
(j) Borrowing and Security...................6
(k) Guarantees, etc..........................6
(l) Insurance................................7
(m) Pensions, etc............................7
Section 3.3 Certain Contracts.................................7
(a) Advisory.................................8
(b) Administration...........................8
(c) Distribution.............................8
(d) Custodian and Depository.................8
(e) Transfer and Dividend Disbursing Agency..8
(f) Shareholder Servicing....................8
(g) Legal, Accounting, Taxes and Other.......9
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees......................................10
Section 3.5 Ownership of Assets of the Trust.................10
ARTICLE IV. SHARES...........................................10
Section 4.1 Description of Shares............................10
Section 4.2 Establishment and Designation of Series..........12
(a) Assets Belonging to Series..............12
(b) Liabilities Belonging to Series.........13
(c) Dividends...............................13
(d) Liquidation.............................14
(e) Voting..................................15
(f) Redemption by Shareholder...............15
(g) Redemption by Trust.....................15
(h) Net Asset Value.........................16
(i) Transfer................................16
(j) Equality................................16
(k) Fractions...............................16
(l) Conversion Rights.......................17
Section 4.3 Ownership of Shares..............................17
Section 4.4 Investments in the Trust.........................17
Section 4.5 No Preemptive Rights.............................17
Section 4.6 Status of Shares and Limitation of Personal
Liability........................................17
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<PAGE>
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS.........18
Section 5.1 Voting Powers....................................18
Section 5.2 Meetings.........................................18
Section 5.3 Record Dates.....................................19
Section 5.4 Quorum and Required Vote.........................19
Section 5.5 Action by Written Consent........................20
Section 5.6 Inspection of Records............................20
Section 5.7 Additional Provisions............................20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION.........20
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice...................................20
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety................................21
Section 6.3 Indemnification of Shareholders..................21
Section 6.4 Indemnification of Trustees, Officers, etc.......22
Section 6.5 Advances of Expenses.............................22
Section 6.6 Indemnification Not Exclusive, etc...............22
Section 6.7 Liability of Third Persons Dealing with
Trustees.........................................23
ARTICLE VII. MISCELLANEOUS....................................23
Section 7.1 Duration and Termination of Trust................23
Section 7.2 Reorganization...................................23
Section 7.3 Amendments.......................................24
Section 7.4 Filing of Copies; References; Headings...........24
Section 7.5 Applicable Law...................................25
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<PAGE>
LAKE SHORE FAMILY OF FUNDS
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made this 3rd day of September,
1997, by the Trustees hereunder, and by the holders of Shares of beneficial
interest to be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust is being formed to carry on the business
of an investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of an Ohio business trust in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 NAME. This Trust shall be known as "Lake Shore Family of
Funds" and the Trustees shall conduct the business of the Trust under that name.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Ohio business trust established
by this Agreement and Declaration of Trust, as amended
from time to time;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series of
the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of
Article IV;
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(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time;
(g) "Commission " shall have the meaning given it in the 1940 Act;
(h) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to
time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended
from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to engage in any and all lawful acts or activities for
which business trusts may be formed under Chapter 1746.01 through 1746.99 of the
Ohio Revised Code. Until the Trustees determine otherwise, the principal office
of the Trust is to be located at 1650 Lake Shore Drive, Suite 280, Columbus,
Ohio 43204-4895.
ARTICLE III
THE TRUSTEES
SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEES. Upon execution of this Declaration of
Trust or a counterpart hereof or some other writing in
which he accepts such Trusteeship and agrees to the
provisions hereof, Earl V. (Buck) Newsome, Jr. shall
become a Trustee hereof.
(b) NUMBER. The Trustees serving as such, whether named
above or hereafter becoming a Trustee, may increase or
decrease the number of Trustees to a number other than
the number theretofore determined. No decrease in the
number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term,
but the number of Trustees may be decreased in conjunction
with the removal of a Trustee pursuant to subsection (e) of
this Section 3.1.
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(c) TERM. Each Trustee shall serve as a Trustee during the
lifetime of the Trust and until its termination as
hereinafter provided or until such Trustee sooner dies,
resigns, retires or is removed. The Trustees may elect
their own successors and may, pursuant to Section 3.1(f)
hereof, appoint Trustees to fill vacancies; provided
that, immediately after filling a vacancy, at least two-
thirds of the Trustees then holding office shall have
been elected to such office by the Shareholders at an
annual or special meeting. If at any time less than a
majority of the Trustees then holding office were so
elected, the Trustees shall forthwith cause to be held as
promptly as possible, and in any event within 60 days, a
meeting of Shareholders for the purpose of electing
Trustees to fill any existing vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust
or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to any officer of the
Trust, and such resignation or retirement shall take effect
upon such delivery or upon such later date as is specified in
such instrument.
(e) REMOVAL. Any Trustee may be removed with or without
cause at any time: (i) by written instrument, signed by
at least two-thirds of the number of Trustees prior to
such removal, specifying the date upon which such removal
shall become effective, (ii) by vote of the Shareholders
holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting
called for the purpose, or (iii) by a declaration in
writing signed by Shareholders holding not less than two-
thirds of the Shares then outstanding and filed with the
Trust's Custodian.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation, the death,
resignation, retirement, removal or incapacity of any of
the Trustees or resulting from an increase in the number
of Trustees by the Trustees, may (but so long as there
are at least three remaining Trustees, need not unless
required by the 1940 Act) be filled either by a majority
of the remaining Trustees through the appointment in
writing of such other person as such remaining Trustees
in their discretion shall determine (unless a shareholder
election is required by the 1940 Act) or by the election
by the Shareholders, at a meeting called for the purpose,
of a person to fill such vacancy, and such appointment or
election shall be effective upon the written acceptance
of the person named therein to serve as a Trustee and
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agreement by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to
be effective at a later date shall become effective only at or
after the effective date of said retirement, resignation, or
increase in number of Trustees. As soon as any Trustee so
appointed or elected shall have accepted such appointment or
election and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment or election is
effective, the Trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further act
or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one
of them, shall not operate to annul or terminate the Trust or
to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Declaration of
Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for
cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
SECTION 3.2 POWERS OF THE TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders; they may as they consider appropriate elect and
remove officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one or
more advisers, administrators, depositories and custodians and may
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authorize any depository or custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or shareholder servicing agents or any of the foregoing, provide for
the distribution of Shares by the Trust through one or more distributors,
principal underwriters or otherwise, set record dates or times for the
determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
principal underwriter, depository, custodian, transfer and dividend disbursing
agent, or any other agent or consultant of the Trust such authority, powers,
functions and duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without implied limitation
the power and authority to act in the name of the Trust and of the Trustees, to
sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority:
(a) INVESTMENTS. To invest and reinvest cash and other property,
and to hold cash or other property uninvested without in any
event being bound or limited by any present or future law or
custom in regard to investments by trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or
all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise
any rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute
and deliver proxies or powers of attorney to such person
or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with
relation to securities, debt instruments or property as
the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription
or otherwise which in any manner arise out of ownership of
securities or debt instruments;
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(e) FORM OF HOLDING. To hold any security, debt instrument or
property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any
plan for the reorganization, consolidation or merger of
any corporation or issuer, any security or debt
instrument of which is or was held in the Trust; to
consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to
pay calls or subscriptions with respect to any security
or debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any
securities or debt instruments in acting through a
committee, depository, voting trustee or otherwise, and
in that connection to deposit any security or debt
instrument with, or transfer any security or debt
instrument to, any such committee, depository or trustee,
and to delegate to them such power and authority with
relation to any security or debt instrument (whether or
not so deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such
committee, depository or trustee as the Trustees shall
deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for
taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general
or limited partnerships and any other combinations or
associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage
and pledge the assets of the Trust or any part thereof to
secure obligations arising in connection with such
borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust property
or any part thereof to secure any of or all such obligations;
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(l) INSURANCE. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance
policies insuring the Shareholders, Trustees, officers,
employees, agents, consultants, investment advisers,
managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof
(or any person connected therewith), of the Trust
individually against all claims and liabilities of every
nature arising by reason of holding, being or having held
any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person
in any such capacity, including any action taken or
omitted that may be determined to constitute negligence;
provided, however, that insurance which protects the
Trustees and officers against liabilities rising from
action involving willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of their offices may not be purchased;
and,
(m) PENSIONS, ETC. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt,
establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the Bylaws, any action to be taken by the Trustees
may be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office (or such larger
or different number as may be required by the 1940 Act or other applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their
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powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals ("Contracting
Party") to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or of the Trust and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the
Trustees with respect to the investments of the Trust or
of the assets belonging to any Series of Shares of the
Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make
investment decisions with respect thereto, and to place
purchase and sale orders for portfolio transactions
relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of
the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust, to
supervise all or any part of the operations of the Trust,
and to provide all or any part of the administrative and
clerical personnel, office space and office equipment and
services appropriate for the efficient administration and
operations of the Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust, to
be principal underwriter of such Shares, and/or to act as
agent of the Trust in the sale of Shares and the
acceptance or rejection of orders for the purchase of
Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and
to maintain custody of the property of the Trust and
accounting records in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain
records of the ownership of outstanding Shares, the
issuance and redemption and the transfer thereof, and to
disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest
any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect
to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares,
and similar matters; and
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(g) LEGAL, ACCOUNTING, TAXES AND OTHER. To handle all or any
part of the legal, accounting, tax or other
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust, or
that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good faith
reasonably justified by such facts by a majority of such Trustees not having any
such relationship or interest (even though such unrelated or disinterested
Trustees are less than a quorum of all of the Trustees), or (2) the specific
contract involved is fair to the Trust as of the time it is authorized, approved
or ratified by the Trustees or by the Shareholders.
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SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
SECTION 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares, as they deem necessary or desirable, to establish and designate such
Series, and to fix and determine the relative rights and preferences as between
the different Series of Shares as to right of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Series shall have
separate voting rights or no voting rights. Except as aforesaid all Shares of
the different Series shall be identical.
The Shares of each Series may be issued or reissued from time to time
in one or more classes ("Classes"), as determined by the Board of Trustees
pursuant to resolution. Each Class shall be appropriately designated, prior to
the issuance of any shares thereof, by some distinguishing letter, number or
title. All Shares within a Class shall be alike in every particular. All Shares
of each Series shall be of equal rank and have the same
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powers, preferences and rights, and shall be subject to the same
qualifications, limitations and restrictions without distinction between the
shares of different Classes thereof, except with respect to such differences
among such Classes, as the Board of Trustees shall from time to time determine
to be necessary or desirable, including differences in the rate or rates of
dividends or distributions. The Board of Trustees may from time to time increase
the number of Shares allocated to any Class already created by providing that
any unissued Shares of the applicable Series shall constitute part of such
Class, or may decrease the number of Shares allocated to any Class already
created by providing that any unissued Shares previously assigned to such Class
shall no longer constitute part thereof. The Board of Trustees is hereby
empowered to classify or reclassify from time to time any unissued Shares of
each Series by fixing or altering the terms thereof and by assigning such
unissued shares to an existing or newly created Class. Notwithstanding anything
to the contrary in this paragraph the Board of Trustees is hereby empowered (i)
to redesignate any issued Shares of any Series by assigning a distinguishing
letter, number or title to such shares and (ii) to reclassify all or any part of
the issued Shares of any Series to make them part of an existing or newly
created Class. The number of authorized Shares and the number of Shares of each
Series that may be issued is unlimited, and the Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable (but may be
subject to mandatory contribution back to the Trust as provided in subsection
(g) of Section 4.2). The Trustees may classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Series into one or more
Series that may be established and designated from time to time. The Trustees
may hold as treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish record
dates and times for the purposes of determining the holders of Shares entitled
to be treated as such, to the extent provided or referred to in Section 5.3.
The establishment and designation of any Series of Shares in addition
to that established and designated in Section 4.2, or of any Class of Shares,
shall be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series or Class, or as otherwise provided in
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such instrument. At any time that there are no Shares outstanding of any
particular Series or Class previously established and designated the Trustees
may by an instrument executed by a majority of their number abolish that Series
or Class and the establishment and designation thereof. Each instrument referred
to in this paragraph shall have the status of an amendment to this Declaration
of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Series of the Trust to the same extent as if such person were not
a Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate two
Series of Shares: the "Equity Fund" and the "Balanced Fund". The Shares of these
Series and any Shares of any further Series that may from time to time be
established and designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Series or Class at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) ASSETS BELONGING TO SERIES. All consideration received
by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such
consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors,
and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same
may be, together with any General Items allocated to that
Series as provided in the following sentence, are herein
referred to as "assets belonging to" that Series. In the
event that there are any assets, incomes, earnings,
profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any
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particular Series (collectively "General Items"), the Trustees
shall allocate such General Items to and among any one or more
of the Series established and designated from time to time in
such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so
allocated to a particular Series shall belong to that Series.
Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all Series for all purposes.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding
upon the Shareholders.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to
each particular Series shall be charged with the
liabilities of the Trust in respect of that Series and
all expenses, costs, charges and reserves attributable to
that Series, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees to
and among any one or more of the Series established and
designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a Series are
herein referred to as "liabilities belonging to" that
Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive
and binding upon the holders of all Series for all
purposes.
(c) DIVIDENDS. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from
such of the estimated income and capital gains, accrued
or realized, from the assets belonging to that Series, as
the Trustees may determine, after providing for actual
and accrued liabilities belonging to that Series. All
dividends and distributions on Shares of a particular
Series shall be distributed pro rata to the holders of
that Series in proportion to the number of Shares of that
Series held by such holders at the date and time of
record established for the payment of such dividends or
distributions, except that in connection with any
dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution
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shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by the
time or times established by the Trustees under such program
or procedure, and except that if Classes have been established
for any Series, the rate of dividends or distributions may
vary among such Classes pursuant to resolution, which may be a
standing resolution, of the Board of Trustees. Such dividends
and distributions may be made in cash or Shares or a
combination thereof as determined by the Trustees or pursuant
to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance
with subsection (h) of Section 4.2.
The Trust intends to qualify each Series as a "regulated
investment company" under the Internal Revenue Code of 1986,
as amended, or any successor or comparable statute thereto,
and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of
the Trust, the Board of Trustees shall have the power, in its
sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part
as capital gains distributions, amounts sufficient, in the
opinion of the Board of Trustees, to enable each Series to
qualify as a regulated investment company and to avoid
liability of the Series for federal income tax in respect of
that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions
greater than or less than the amount necessary to qualify as a
regulated investment company and to avoid liability of each
Series for such tax.
(d) LIQUIDATION. In event of the liquidation or dissolution
of the Trust, the Shareholders of each Series that has
been established and designated shall be entitled to
receive, as a Series, when and as declared by the
Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series.
The assets so distributable to the Shareholders of any
particular Series shall be distributed among such
Shareholders in proportion to the number of Shares of
that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be
authorized by vote of a majority of the Trustees then in
office subject to the approval of a majority of the
outstanding voting Shares of that Series, as defined in
the 1940 Act.
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(e) VOTING. All shares of all Series shall have "equal
voting rights" as such term is defined in the Investment
Company Act of 1940 and except as otherwise provided by
that Act or rules, regulations or orders promulgated
thereunder. On each matter submitted to a vote of the
Shareholders, all Shares of all Series shall vote as a
single class ("Single Class Voting"); provided, however,
that (a) as to any matter with respect to which a
separate vote of any Series is required by the 1940 Act
or rules and regulations promulgated thereunder, or would
be required under the Ohio General Corporation Law if the
Trust were an Ohio corporation, such requirements as to
a separate vote by that Series shall apply in lieu of
Single Class Voting as described above; (b) in the event
that the separate vote requirements referred to in (a)
above apply with respect to one or more Series, then,
subject to (c) below, the Shares of all other Series
shall vote as a single class; and (c) as to any matter
which does not affect the interest of a particular
Series, only the holders of Shares of the one or more
affected Series shall be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a
particular Series shall have the right at such times as
may be permitted by the Trust, but no less frequently
than once each week, to require the Trust to redeem all
or any part of his Shares of that Series at a redemption
price equal to the net asset value per Share of that
Series next determined in accordance with subsection (h)
of this Section 4.2 after the Shares are properly
tendered for redemption. Payment of the redemption price
shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or
partly in securities or other assets belonging to the
Series of which the Shares being redeemed are part at the
value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem
Shares of that Series during any period or at any time when
and to the extent permissible under the 1940 Act, and such
redemption is conditioned upon the Trust having funds or
property legally available therefor.
(g) REDEMPTION BY TRUST. Each Share of each Series that has
been established and designated is subject to redemption
by the Trust at the redemption price which would be
applicable if such Share was then being redeemed by the
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Shareholder pursuant to subsection (f) of this Section 4.2:
(a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially
adverse consequences to all or any of the holders of the
Shares, or any Series thereof, of the Trust, or (b) upon such
other conditions as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Shareholder accounts of a
minimum amount. Upon such redemption the holders of the Shares
so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
(h) NET ASSET VALUE. The net asset value per Share of any
Series shall be the quotient obtained by dividing the
value of the net assets of that Series (being the value
of the assets belonging to that Series less the
liabilities belonging to that Series) by the total number
of Shares of that Series outstanding, all determined in
accordance with the methods and procedures, including
without limitation those with respect to rounding,
established by the Trustees from time to time.
(i) TRANSFER. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Series
will be recorded on the Share transfer records of the Trust
applicable to that Series only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of
that Series and at such other times as may be permitted by the
Trustees.
(j) EQUALITY. All Shares of each particular Series shall
represent an equal proportionate interest in the assets
belonging to that Series (subject to the liabilities
belonging to that Series), and each Share of any
particular Series shall be equal to each other Share of
that Series; but the provisions of this sentence shall
not restrict any distinctions permissible under
subsection (c) of this Section 4.2 that may exist with
respect to dividends and distributions on Shares of the
same Series. The Trustees may from time to time divide
or combine the Shares of any particular Series into a
greater or lesser number of Shares of that Series without
thereby changing the proportionate beneficial interest in
the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.
(k) FRACTIONS. Any fractional Share of any Series or Class, if any
such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole
Share of that Series or Class, including with respect to
voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
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(l) CONVERSION RIGHTS. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series shall have the
right to convert said Shares into Shares of one or more other
Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
that has been established and designated. No certificates certifying the
ownership of Shares need be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any transfer or similar agent, as the case may be,
shall be conclusive as to who are the Shareholders and as to the number of
Shares of each Series and Class held from time to time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares
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constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided herein to call
upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Series to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of an Ohio business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of Trust, the
Bylaws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the Bylaws to be taken by Shareholders.
SECTION 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time to time for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating
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the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders (including a meeting involving only the holders of Shares of one or
more but less than all Series) for a period of 30 days after written application
by Shareholders holding at least 25% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein or in the Bylaws, then Shareholders holding at least 25% of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
SECTION 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or (subject to any provisions permissible
under subsection (c) of Section 4.2 with respect to dividends or distributions
on Shares that have not been ordered and/or paid for by the time or times
established by the Trustees under the applicable dividend or distribution
program or procedure then in effect) to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date and time
disposed of his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is
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present, shall decide any questions and a plurality shall elect a Trustee,
except when a different vote is required or permitted by any provision of the
1940 Act or other applicable law or by this Declaration of Trust or the Bylaws.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of an Ohio corporation under the Ohio General Corporation Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been executed or
done only by or for the Trust or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the Shareholders to which such Trustee or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
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Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of the State of Ohio and
shall recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties. Nothing stated herein is intended to detract from
the protection accorded to Trustees by Ohio Revised Code Sections 1746.08 and
1701.59, as amended from time to time.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the
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Shareholder) shall assume the defense against such charge and satisfy any
judgment thereon, and the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of its Trustees and officers, including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a proceeding to
the full extent permitted by the Securities Act of 1933, as amended, the 1940
Act, and Ohio Revised Code Chapter 1707, as amended. In the event any of these
laws conflict with Ohio Revised Code Section 1701.13(E), as amended, these laws,
and not Ohio Revised Code Section 1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators. Nothing contained in this article shall affect any rights
to indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
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SECTION 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of that Series. Following such transfer, the Trustees shall distribute
such cash, shares or other securities (giving due effect to the assets and
liabilities belonging to and any other differences among the various Series the
assets belonging to which have so been transferred) among the Shareholders of
the Series the assets belonging to which have been so transferred; and if all of
the assets of the Trust have been so transferred, the Trust shall be terminated.
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SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Class or (b) having the purpose of changing
the name of the Trust or the name of any Shares theretofore established and
designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of the State of Ohio, as well as any other governmental office
where such filing may from time to time be required, but the failure to make
any such filing shall not impair the effectiveness of this instrument or any
such amendment. Anyone dealing with the Trust may rely on a certificate by
an officer of the Trust as to whether or not any such amendments have been made,
as to the identities of the Trustees and officers, and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such amendments. In this instrument and in any such
amendment, references to this
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instrument, and all expressions like "herein," "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the feminine
and neuter genders. Headings are placed herein for convenience of reference only
and shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Ohio, including the Ohio General Corporation Law as the same may be
amended from time to time, but the reference to said Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in connection
with an entity organized in corporate form. The Trust shall be of the type
referred to in Section 1746.01 of the Ohio Revised Code, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
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IN WITNESS WHEREOF, the undersigned has hereunto set his hand for
himself and his assigns, as of the day and year first above written.
/S/ EARL V. (BUCK) NEWSOME, JR.
Earl V. (Buck) Newsome, Jr.
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said county and state, personally
appeared the above named Earl V. (Buck) Newsome, Jr., who acknowledged that he
did sign the foregoing instrument and that the same is his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on this 3rd day of September, 1997.
/S/ ELIZABETH A. SANTEN
Elizabeth A. Santen
Notary Public
My Commission Expires: April 6, 1998
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BYLAWS
OF
LAKE SHORE FAMILY OF FUNDS
ARTICLE 1
AGREEMENT AND DECLARATION OF TRUST AND OFFICES
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of the Lake Shore Family of Funds, the Ohio business
trust established by the Declaration of Trust (the "Trust").
1.2 OFFICES. The Trust may maintain one or more other offices,
including its principal office, in or outside of Ohio, in such cities as the
Trustees may determine from time to time. Unless the Trustees otherwise
determine, the principal office of the Trust shall be located in Cincinnati,
Ohio.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as any meeting of the shareholders.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the President or the Treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the Secretary or an Assistant Secretary
or by the officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
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2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940.
2.6 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Trustees or any committee thereof may be taken without a
meeting, if a written consent of such action is signed by a majority of the
Trustees then in office or a majority of the members of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Trustees or such committee.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The President of the Trust shall be a Trustee and
may but need not be a shareholder; and any other officer may be but none need be
a Trustee or shareholder. Any two or more offices may be held by the same
person.
3.2 ELECTION. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time. Vacancies in any office may be filled
at any time.
3.3 TENURE. The President, the Treasurer and the Secretary shall hold
office for one year and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
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3.4 POWERS. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as an Ohio
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 PRESIDENT. Unless the Trustees otherwise provide, the President, or
in the absence of the President, any other Trustee chosen by the Trustees, shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be the chief executive officer of the Trust.
3.6 TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.7 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE 4
COMMITTEES
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these Bylaws may not be
delegated. Except as the
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Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these Bylaws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. The fiscal year of the Trust shall be fixed, and shall
be subject to change by the Trustees.
ARTICLE 7
SEAL
7.1 GENERAL. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Ohio", together with the name of the
Trust and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice
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President, the Secretary or the Treasurer and need not bear the seal of the
Trust, but shall state the substance of or make reference to the provisions of
Section 6.1 of the Declaration of Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him, in such form as shall be prescribed
from time to time by the Trustees. Such certificate shall be signed by the
President and by the Treasurer or Assistant Treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent, or by a registrar,
other than a Trustee, officer or employee of the Trust. In case any officer who
has signed or whose facsimile signature has been placed on such certificate
shall cease to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he were such officer at the time
of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. In the event certificates
have been issued, a pledgee of shares transferred as collateral security shall
be entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral security,
and the name of the pledgor shall be stated thereon, who alone shall be liable
as a shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
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ARTICLE 10
CUSTODIAN
10.1 GENERAL. The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at least Five Hundred
Thousand ($500,000) Dollars as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
DEALINGS WITH TRUSTEES AND OFFICERS
11.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which he is interested.
ARTICLE 12
SHAREHOLDERS
12.1 MEETINGS. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940 for that purpose or whenever otherwise required pursuant to
the Declaration of Trust. Any meeting shall be held on such day and at such time
as the President or the Trustees may fix in the notice of the meeting.
12.2 RECORD DATES. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a time, which shall be not more than 60
days before the date of any meeting of shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case, only shareholders of record on such record date shall have
such right, notwithstanding any transfer of shares on the books of the Trust
after the record date; or without fixing such record date the Trustees may for
any such purposes close the register or transfer books for all or any part of
such period.
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ARTICLE 13
AMENDMENTS TO THE BYLAWS
13.1 GENERAL. These Bylaws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
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Lake Shore Fund Group, Ltd.
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
Re: Advisory Agreement
Ladies and Gentlemen:
The Lake Shore Family of Funds (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), and subject to the rules and regulations promulgated
thereunder. The Trust's shares of beneficial interest are divided into two
separate series, the Equity Fund and the Balanced Fund, referred to individually
as the "Fund" and collectively as the "Funds". Each share of a Fund represents
an undivided interest in the assets, subject to the liabilities, allocated to
that Fund. Each Fund has a separate investment objective and separate investment
policies.
1. APPOINTMENT AS ADVISER. The Trust being duly authorized
hereby appoints and employs Lake Shore Fund Group LLC (the "Adviser") as
discretionary portfolio manager on the terms and conditions set forth herein
of the Funds.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The
Adviser accepts the appointment as discretionary portfolio manager and agrees
to use its best professional judgement to make timely investment decisions
for the Funds in accordance with the provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE ADVISER. The Adviser is
hereby employed and authorized to select portfolio securities for investment
by the Trust on behalf of the Funds, to
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purchase and sell securities of the Funds, and, upon making any purchase or sale
decision, to place orders for the execution of such portfolio transactions in
accordance with paragraphs 5 and 6 hereof. In providing portfolio management
services to the Funds, the Adviser shall be subject to such investment
restrictions as are set forth in the Act and the rules thereunder, the Internal
Revenue Code of 1986, applicable state securities laws, the supervision and
control of the Trustees of the Trust, such specific instructions as the Trustees
may adopt and communicate to the Adviser and the investment objectives, policies
and restrictions of the Trust applicable to the Funds furnished pursuant to
paragraph 4. The Adviser is not authorized by the Trust to take any action,
including the purchase or sale of securities for the Funds, in contravention of
any restriction, limitation, objective, policy or instruction described in the
previous sentence. The Adviser shall maintain on behalf of the Trust the records
listed in Schedule A hereto (as amended from time to time). At the Trust's
reasonable request, the Adviser will consult with the Trust with respect to any
decision made by it with respect to the investments of the Funds.
4. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Trust
will provide the Adviser with the statement of investment objectives, policies
and restrictions applicable to the Funds as contained in the Trust's
registration statement under the Act and the Securities Act of 1933, and any
instructions adopted by the Trustees supplemental thereto. The Trust will
provide the Adviser with such further information concerning the investment
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objectives, policies and restrictions applicable thereto as the Adviser may from
time to time reasonably request. The Trust retains the right, on written notice
to the Adviser from the Trust, to modify any such objectives, policies or
restrictions in any manner at any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated
by payment to or delivery by Star Bank, N.A., or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Trust, of all cash and/or securities
due to or from the Funds, and the Adviser shall not have possession or custody
thereof. The Adviser shall advise the Custodian and confirm in writing to the
Trust and to Countrywide Fund Services, Inc. or any other designated agent of
the Trust, all investment orders for the Funds placed by it with brokers and
dealers. The Adviser shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Adviser.
6. ALLOCATION OF BROKERAGE. The Adviser shall have authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Adviser and to select the markets on or in which the
transactions will be executed.
In doing so, the Adviser will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this policy,
the Adviser may consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may effect or
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be a party to any such transaction or other transactions to which other clients
of the Adviser may be a party. It is understood that neither the Trust nor the
Adviser has adopted a formula for allocation of the Funds' investment
transaction business. It is also understood that it is desirable for the Trust
that the Adviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at a higher commission to the Funds than may result when
allocating brokerage to other brokers on the basis of seeking the lowest
commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Funds with such certain brokers, subject
to review by the Trust's Trustees from time to time with respect to the extent
and continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Adviser in connection with its services to
other clients.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Funds as well as other clients, the Adviser,
to the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as expenses incurred in the transaction, will be made by the
Adviser in the manner it
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considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to such other clients.
For each fiscal quarter of the Trust, the Adviser shall prepare and
render reports to the Trust's Trustees of the total brokerage business placed
and the manner in which the allocation has been accomplished. Such reports shall
set forth at a minimum the information required to be maintained by Rule
31a-1(b)(9) under the Act.
7. PROXIES. The Trust will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Funds may be
invested from time to time. At the request of the Trust, the Adviser shall
provide the Trust with its recommendations as to the voting of such proxies.
8. REPORTS TO THE ADVISER. The Trust will provide the Adviser
with such periodic reports concerning the status of the Funds as the Adviser
may reasonably request.
9. FEES FOR SERVICES. For all of the services to be rendered and
payments made as provided in this Agreement, each Fund will pay the Adviser a
fee, computed and accrued daily and paid monthly, at the annual rate of 1.00%
of its average daily net assets.
10. ALLOCATION OF CHARGES AND EXPENSES. The Adviser shall employ
or provide and compensate the executive, administrative, secretarial and
clerical personnel necessary to provide the services set forth herein, and
shall bear the expense thereof. The Adviser shall compensate all Trustees,
officers and employees
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of the Trust who are also employees of the Adviser. The Adviser will pay all
expenses incurred in connection with the sale or distribution of the Funds'
shares to the extent such expenses are not assumed by the Funds under the
Trust's Distribution Expense Plan.
The Funds will be responsible for the payment of all operating expenses
of the Funds, including fees and expenses incurred by the Funds in connection
with membership in investment company organizations, brokerage fees and
commissions, legal, auditing and accounting expenses, expenses of registering
shares under federal and state securities laws, insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, the transfer, shareholder
service and dividend disbursing agent and the accounting and pricing agent of
the Funds, expenses including clerical expenses of the issue, sale, redemption
or repurchase of shares of the Funds, the fees and expenses of Trustees of the
Trust who are not interested persons of the Trust, the cost of preparing,
printing and distributing prospectuses, statements, reports and other documents
to shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Trust may be a party and indemnification of the Trust's officers
and Trustees with respect thereto, or any other expense not specifically
described above incurred in the performance of the Trust's obligations. All
other expenses not expressly assumed by the
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Adviser herein incurred in connection with the organization, registration of
shares and operations of the Funds will be borne by the Funds.
11. OTHER INVESTMENT ACTIVITIES OF THE ADVISER. The Trust
acknowledges that the Adviser or one or more of its affiliates may have
investment responsibilities or render investment advice to or perform other
investment advisory services for other individuals or entities and that the
Adviser, its affiliates or any of its or their directors, officers, agents or
employees may buy, sell or trade in any securities for its or their respective
accounts ("Affiliated Accounts"). Subject to the provisions of paragraph 2
hereof, the Trust agrees that the Adviser or its affiliates may give advice or
exercise investment responsibility and take such other action with respect to
other Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Funds, provided that the Adviser
acts in good faith, and provided further, that it is the Adviser's policy to
allocate, within its reasonable discretion, investment opportunities to the
Funds over a period of time on a fair and equitable basis relative to the
Affiliated Accounts, taking into account the investment objectives and policies
of the Funds and any specific investment restrictions applicable thereto. The
Trust acknowledges that one or more of the Affiliated Accounts may at any time
hold, acquire, increase, decrease, dispose of or otherwise deal with positions
in investments in which the Funds may have an interest from time to time,
whether in transactions which involve the Funds or
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otherwise. The Adviser shall have no obligation to acquire for the Funds a
position in any investment which any Affiliated Account may acquire, and the
Trust shall have no first refusal, co-investment or other rights in respect of
any such investment, either for the Funds or otherwise.
12. CERTIFICATE OF AUTHORITY. The Trust and the Adviser shall
furnish to each other from time to time certified copies of the resolutions
of their Trustees or Board of Directors or executive committees, as the case may
be, evidencing the authority of officers and employees who are authorized to act
on behalf of the Trust, the Funds and/or the Adviser.
13. LIMITATION OF LIABILITY. The Adviser shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not have
resulted from the Adviser's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the Adviser
in its actions under this Agreement or breach of its duty or of its obligations
hereunder. Nothing in this paragraph 13 shall be construed in a manner
inconsistent with Sections 17(h) and (i) of the Act.
14. CONFIDENTIALITY. Subject to the duty of the Adviser and the
Trust to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the
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parties hereto shall treat as confidential all information pertaining to the
Funds and the actions of the Adviser and the Trust in respect thereof.
15. ASSIGNMENT. No assignment of this Agreement shall be made by
the Adviser, and this Agreement shall terminate automatically in the event
of such assignment. The Adviser shall notify the Trust in writing sufficiently
in advance of any proposed change of control, as defined in Section 2(a)(9) of
the Act, as will enable the Trust to consider whether an assignment will occur,
and to take the steps necessary to enter into a new contract with the Adviser.
16. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE TRUST.
The Trust represents, warrants and agrees that:
A. The Adviser has been duly appointed by the
Trustees of the Trust to provide investment advisory services to
the Funds as contemplated hereby.
B. The Trust will deliver to the Adviser true and
complete copies of its then current prospectuses and statements of
additional information as effective from time to time and such other documents
or instruments governing the investments of the Funds and such other information
as is necessary for the Adviser to carry out its obligations under this
Agreement.
C. The Trust is currently in compliance and shall at
all times comply with the requirements imposed upon the Trust by
applicable law and regulations.
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17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
ADVISER. The Adviser represents, warrants and agrees that:
A. The Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940.
B. The Adviser will maintain, keep current and preserve
on behalf of the Trust, in the manner and for the time periods required or
permitted by the Act, the records identified in Schedule A. The Adviser agrees
that such records (unless otherwise indicated on Schedule A) are the property of
the Trust, and will be surrendered to the Trust promptly upon request.
C. The Adviser will complete such reports concerning
purchases or sales of securities on behalf of the Funds as the Trust may
from time to time require to ensure compliance with the Act, the Internal
Revenue Code of 1986 and applicable state securities laws.
D. The Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and will
provide the Trust with a copy of the code of ethics and evidence of its
adoption. Within forty-five (45) days of the end of the last calendar quarter of
each year while this Agreement is in effect, an executive officer of the Adviser
shall certify to the Trust that the Adviser has complied with the requirements
of Rule 17j-1 during the previous year and that there has been no violation of
the Adviser's code of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation. Upon the written
request of the Trust, the
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Adviser shall permit the Trust, its employees or its agents to examine the
reports required to be made to the Adviser by Rule 17j-1(c)(1).
E. The Adviser will, promptly after filing with the
Securities and Exchange Commission an amendment to its Form ADV, furnish a copy
of such amendment to the Trust.
F. Upon request of the Trust, the Adviser will
provide assistance to the Custodian in the collection of income
due or payable to the Funds.
G. The Adviser will immediately notify the Trust of the
occurrence of any event which would disqualify the Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the Act
or otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but
only by written agreement between the Adviser and the Trust, which
amendment, other than amendments to Schedule A, is subject to the approval of
the Trustees and the shareholders of the Funds in the manner required by the Act
and the rules thereunder, subject to any applicable exemptive order of the
Securities and Exchange Commission modifying the provisions of the Act with
respect to approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective
on the date of its execution and shall remain in force for a period of two (2)
years from such date, and from year to year thereafter but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Trustees who are not interested persons of the Trust or the Adviser, cast
in person at a meeting called for the purpose
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of voting on such approval, and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of the Funds. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
20. TERMINATION. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
21. OBLIGATIONS OF THE TRUST. 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 bind only the trust property of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.
22. DEFINITIONS. As used in paragraphs 15 and 19 of this
Agreement, the terms "assignment," "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations
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thereunder.
23. APPLICABLE LAW. To the extent that state law is not
preempted by the provisions of any law of the United States
heretofore or hereafter enacted, as the same may be amended from
time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Ohio.
LAKE SHORE FAMILY OF FUNDS
By: __________________________
Title: _______________________
Date: ______________, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
LAKE SHORE FUND GROUP, Ltd.
By: __________________________
Title: Manager Director
Date: ___________, 1997
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Adviser on behalf of
the Funds for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf
of the Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Funds by brokers or
dealers.
(ii) The supplying of services or benefits by brokers
or dealers to:
(a) The Trust;
(b) The Adviser; and,
(c) Any person affiliated with the foregoing
persons.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as
such.
B. Shall show the nature of the services or benefits made
available.
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C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate
memorandum identifying the person or persons, committees or
groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be
retained as part of this record any memorandum,
recommendation or instruction supporting or authorizing the
purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Adviser's transactions with respect to the Funds.
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* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendation; i.e., buy, sell, hold)
or any internal reports or portfolio adviser reviews.
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<PAGE>
UNDERWRITING AGREEMENT
This Agreement made as of _______________ by and between the Lake Shore
Family of Funds, an Ohio business trust (the "Trust"), and Countrywide
Investments, Inc., an Ohio corporation ("Underwriter").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the
Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest ("Shares") of each series of shares of the Trust (the "Series");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. APPOINTMENT.
The Trust hereby appoints Underwriter as its exclusive agent
for the distribution of Shares, and Underwriter hereby accepts such appointment
under the terms of this Agreement. While this Agreement is in force, the Trust
shall not sell any Shares except on the terms set forth in this Agreement.
Notwithstanding any other provision hereof, the Trust may terminate, suspend or
withdraw the offering of Shares whenever, in its sole discretion, it deems such
action to be desirable.
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<PAGE>
2. SALE AND REPURCHASE OF SHARES.
(a) Underwriter will have the right, as agent for the Trust,
to enter into dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public offering
price (as defined in subparagraph 2(e) hereof) less a discount determined by
Underwriter, which discount shall not exceed the amount of the sales charge
stated in the Trust's effective Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, including the then current prospectus and
statement of additional information (the "Registration Statement"). Upon receipt
of an order to purchase Shares from a dealer with whom Underwriter has a dealer
agreement, Underwriter will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
(c) Underwriter will also have the right, as agent for the
Trust, to sell Shares at their net asset value to such persons as may be
approved by the Trustees of the Trust, all such sales to comply with the
provisions of the Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
(d) Underwriter will also have the right to take, as agent for
the Trust, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
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<PAGE>
(e) The public offering price for Shares of each Series shall
be the respective net asset value of Shares of that Series then in effect, plus
any applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder. In no event
shall any applicable sales charge exceed the maximum sales charge permitted by
the Rules of Fair Practice of the NASD.
(f) The net asset value of Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of Shares of each Series shall be
calculated by the Trust or by another entity on behalf of the Trust. Underwriter
shall have no duty to inquire into or liability for the accuracy of the net
asset value per Share as calculated.
(g) On every sale, the Trust shall receive the applicable net
asset value of Shares promptly, but in no event later than the third business
day following the date on which Underwriter shall have received an order for the
purchase of Shares. Underwriter shall have the right to retain the sales charge
less any applicable dealer discount.
(h) Upon receipt of purchase instructions, Underwriter will
transmit such instructions to the Trust or its transfer agent for registration
of Shares purchased.
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<PAGE>
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(j) Underwriter, as agent of and for the account of the Trust,
may repurchase Shares at such prices and upon such terms and conditions as shall
be specified in the Registration Statement.
3. SALE OF SHARES BY THE TRUST.
The Trust reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
4. BASIS OF SALE OF SHARES.
Underwriter does not agree to sell any specific number of
Shares. Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
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<PAGE>
5. RULES OF NASD, ETC.
(a) Underwriter will conform to the Rules of Fair Practice of
the NASD and the securities laws of any jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter
has a dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of Shares, and
neither Underwriter nor any such dealers shall withhold the placing of purchase
orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or
broker, or otherwise, under all applicable state or federal laws required in
order that Shares may be sold in such states as may be mutually agreed upon by
the parties.
(e) Underwriter shall not make, or permit any representative,
broker or dealer to make, in connection with any sale or solicitation of a sale
of Shares, any representations concerning Shares except those contained in the
then current prospectus and statement of additional information covering the
Shares and in printed information approved by the Trust as
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<PAGE>
information supplemental to such prospectus and statement of additional
information. Copies of the then effective prospectus and statement of additional
information and any such printed supplemental information will be supplied by
the Trust to Underwriter in reasonable quantities upon request.
6. RECORDS TO BE SUPPLIED BY TRUST.
The Trust shall furnish to Underwriter copies of all
information, financial statements and other papers which Underwriter may
reasonably request for use in connection with the distribution of the Shares,
and this shall include, but shall not be limited to, one certified copy, upon
request by Underwriter, of all financial statements prepared for the Trust by
independent public accountants.
7. EXPENSES.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling Shares. All other costs in connection
with the offering of Shares will be paid by the Trust or the Trust's investment
adviser (the "Adviser") in accordance with agreements between them as permitted
by applicable law, including the Act and rules and regulations promulgated
thereunder.
8. INDEMNIFICATION OF TRUST.
Underwriter, to the extent of the net commission received by
it from the sale of Shares but to no greater amount, agrees to indemnify and
hold harmless the Trust, the Adviser and
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<PAGE>
each person who has been, is, or may hereafter be a trustee, director, officer,
employee, shareholder or control person of the Trust or the Adviser, against any
loss, damage or expense (including the reasonable costs of investigation)
reasonably incurred by any of them in connection with any claim or in connection
with any action, suit or proceeding to which any of them may be a party, which
arises out of or is alleged to arise out of or is based upon any untrue
statement or alleged untrue statement of a material fact, or the omission or
alleged omission to state a material fact necessary to make the statements not
misleading, on the part of Underwriter or any agent or employee of Underwriter
or any other person for whose acts Underwriter is responsible, unless such
statement or omission was made in reliance upon written information furnished by
the Trust or the Adviser. Underwriter likewise, to the extent of the net
commission received by it from the sale of Shares but to no greater amount,
agrees to indemnify and hold harmless the Trust, the Adviser and each such
person in connection with any claim or in connection with any action, suit or
proceeding which arises out of or is alleged to arise out of Underwriter's
failure to exercise reasonable care and diligence with respect to its services,
if any, rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for Shares. The term "expenses" for purposes of this
and the next paragraph includes amounts paid in satisfaction of judgments or in
settlements which are made with Underwriter's consent. The
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<PAGE>
foregoing rights of indemnification shall be in addition to any other rights to
which the Trust, the Adviser or each such person may be entitled as a matter of
law.
9. INDEMNIFICATION OF UNDERWRITER.
Underwriter, its directors, officers, employees,
shareholders and control persons shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such persons in
the performance of Underwriter's duties or from the reckless disregard by any of
such persons of Underwriter's obligations and duties under this Agreement. The
Trust will advance attorneys' fees or other expenses incurred by any such person
in defending a proceeding, upon the undertaking by or on behalf of such person
to repay the advance if it is ultimately determined that such person is not
entitled to indemnification. Any person employed by Underwriter who may also be
or become an officer or employee of the Trust shall be deemed, when acting
within the scope of his employment by the Trust, to be acting in such employment
solely for the Trust and not as an employee or agent of Underwriter.
10. TERMINATION AND AMENDMENT OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by Underwriter, (ii) either by action of the
Board of Trustees of
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<PAGE>
the Trust or at a meeting of the Shareholders of the Trust by the affirmative
vote of a majority of the outstanding Shares, and (iii) by a majority of the
Trustees of the Trust who are not interested persons of the Trust or of
Underwriter by vote cast in person at a meeting called for the purpose of voting
on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. EFFECTIVE PERIOD OF THIS AGREEMENT.
This Agreement shall take effect upon its execution and
shall remain in full force and effect for a period of two (2) years from the
date of its execution (unless terminated automatically as set forth in Section
10), and from year to year thereafter, subject to annual approval (i) by
Underwriter, (ii) by the Board of Trustees of the Trust or a vote of a majority
of the outstanding Shares, and (iii) by a majority of the Trustees of the Trust
who are not interested persons of the Trust or of Underwriter by vote cast in
person at a meeting called for the purpose of voting on such approval.
12. LIMITATION OF LIABILITY.
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 bind only the trust
property of the Trust,
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<PAGE>
as provided in the Agreement and Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees
and Shareholders of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees and Shareholders 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 its Agreement and
Declaration of Trust.
13. NEW SERIES.
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust established
during the initial or renewal term of this Agreement.
14. SUCCESSOR INVESTMENT COMPANY.
Unless this Agreement has been terminated in accordance with
Paragraph 10, the terms and provisions of this Agreement shall become
automatically applicable to any investment company which is a successor to the
Trust as a result of reorganization, recapitalization or change of domicile.
15. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
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<PAGE>
16. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of the State
of Ohio.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretation thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
17. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
for this purpose shall be 403 Vine Street, 2nd Floor, Cincinnati, Ohio 45202 and
that the address of Underwriter for this purpose shall be 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202.
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<PAGE>
IN WITNESS WHEREOF, the Trust and Underwriter have each caused
this Agreement to be signed in duplicate on their behalf, all as of the day and
year first above written.
ATTEST: LAKE SHORE FAMILY OF FUNDS
_______________________ By: __________________________
Its: President
ATTEST: COUNTRYWIDE INVESTMENTS, INC.
_______________________ By: __________________________
Its: President
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<PAGE>
CUSTODY AGREEMENT
This AGREEMENT, dated as of ________________, by and between LAKE SHORE
FAMILY OF FUNDS (the "Trust"), a business trust organized under the laws of the
State of Ohio, acting with respect to its existing series as of the date of this
Agreement, and such other series as shall be designated from time to time by the
Trust (individually, a "Fund" and, collectively, the "Funds"), each of them a
series of the Trust and each of them operated and administered by the Trust, and
STAR BANK, N.A., a national banking association (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Trust desires that the Funds' Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Funds and named in Exhibit A hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, as from time to
time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Trust computes the net asset value of Shares of
any Fund.
1.5 "FUND CUSTODY ACCOUNT" shall mean any of the accounts in the name
of the Trust, which is provided for in Section 3.2 below.
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<PAGE>
1.6 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.7 "OFFICER" shall mean the Chairman, the President, any Vice
President, any Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.8 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written Instructions prior to the end
of the next Business Day. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction, it shall
in no way affect the validity of the transaction or the authorization thereof by
the Trust. If Oral Instructions vary from the Written Instructions which purport
to confirm them, the Custodian shall notify the Trust of such variance but such
Oral Instructions will govern unless the Custodian has not yet acted.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
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<PAGE>
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy of a resolution of the
Board of Trustees, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Funds) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
1.12 "SHARES" shall mean, with respect to a Fund, the units of
beneficial interest issued by the Trust on account of such Fund.
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<PAGE>
1.13 "SUB-CUSTODIAN" shall mean and include (i) any branch of a
"qualified U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act,
(ii) any "eligible foreign custodian," as that term is defined in Rule 17f-5
under the 1940 Act, approved by the Board of Trustees and having a contract with
the Custodian which contract has been approved by the Board of Trustees, and
(iii) any securities depository or clearing agency, incorporated or organized
under the laws of a country other than the United States, which operates the
central system for handling of securities or equivalent book-entries in that
country or a transnational system for the central handling of securities or
equivalent book-entries, which securities depository or clearing agency has been
approved by the Board of Trustees; provided, that the Custodian, or a
Sub-Custodian has entered into an agreement with such securities depository or
clearing agency.
1.14 "WRITTEN INSTRUCTIONS" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
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<PAGE>
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Funds at any time during the period of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
2.3 DOCUMENTS TO BE FURNISHED. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Declaration of Trust of the Trust
certified by the Secretary;
b. A copy of the Bylaws of the Trust certified by the
Secretary;
c. A copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian, certified
by the Secretary;
d. A copy of the then current Prospectus of each
Fund; and
e. A certification of the Chairman and Secretary of
the Trust setting forth the names and signatures
of the current Officers of the Trust and other
Authorized Persons.
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<PAGE>
2.4 NOTICE OF APPOINTMENT OF DIVIDEND AND TRANSFER AGENT.
The Trust agrees to notify the Custodian in writing of the appointment,
termination or change in appointment of any Dividend and Transfer Agent of
the Funds.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of a Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of the other Funds) and shall be
identified as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. As to each Fund, the Custodian shall open
and maintain in its trust department a custody account in the name of the Trust
coupled with the name of such Fund, subject only to draft or order of the
Custodian, in which the Custodian shall enter and carry all Securities, cash and
other assets of such Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. (a) In its discretion, the Custodian-
may appoint one or more Sub-Custodians to act as Securities Depositories or
as sub-custodians to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, provided, however,
that the
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<PAGE>
appointment of any such agents and maintenance of any Securities and cash of the
Fund shall be at the Custodian's expense and shall not relieve the Custodian of
any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Funds, it will so notify the Trust
and provide it with information reasonably necessary to determine any such new
Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act, including a
copy of the proposed agreement with such Sub-Custodian. The Trust shall at the
meeting of the Board of Trustees next following receipt of such notice and
information give a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-Custodian previously
approved by the Board of Trustees, it shall so notify the Trust and move the
Securities and cash of the Funds deposited with such Sub-Custodian to another
Sub-Custodian previously approved by the Board of Trustees. The Custodian shall
promptly take such steps as may be required to remove any Sub-Custodian that has
ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
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<PAGE>
(e) The Custodian hereby warrants to the Trust that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of the Funds
pursuant to this Agreement afford protection for such property not materially
different from that afforded by the Custodian's established safekeeping
procedures with respect to similar property held by it (and its securities
depositories) in Cincinnati, Ohio.
(f) The Custodian shall oversee the maintenance of any Securities held
for the Funds by any Sub-Custodian. Any Securities held by a Sub-Custodian will
be subject only to the instructions of the Custodian or its agents; and any
Securities held in an eligible foreign securities depository for the account of
a Sub-Custodian will be subject only to the instructions of such Sub-Custodian.
In the event that a Sub-Custodian permits any of the Securities placed in its
care to be held in an eligible foreign securities depository, such Sub-Custodian
will be required by its agreement with the Custodian to identify on its books
such Securities as being held for the account of the Custodian as a custodian
for its customers.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause
to be delivered, to the Custodian all of the Funds' Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Funds with respect to such
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<PAGE>
Securities, cash or other assets owned by the Funds at any time during the
period of this Agreement, and (b) all cash received by the Funds for the
issuance, at any time during such period, of Shares. The Custodian shall not be
responsible for such Securities, cash or other assets until actually received by
it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or
in a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Trust
shall deliver to the Custodian a resolution of the
Board of Trustees, certified by an Officer, authorizing
and instructing the Custodian on an on-going basis to
deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry
System to the extent possible and practical 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 collateral consisting of
Securities.
(b) Securities of the Funds kept in a Book-Entry System or
Securities Depository shall be kept in an account
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<PAGE>
("Depository Account") of the Custodian in such Book-Entry
System or Securities Depository which includes only assets
held by the Custodian as a fiduciary, custodian or otherwise
for customers.
(c) The records of the Custodian with respect to Securities of a
Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry, identify such Securities as
belonging to such Fund.
(d) If Securities purchased by a Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that such
Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of such Fund. If Securities sold by a Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that payment
for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the
account of such Fund.
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<PAGE>
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Funds are
kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to a Fund resulting (i) from the use of a Book-Entry
System or Securities Depository by reason of any negligence
or willful misconduct on the part of Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of Custodian
or any such Sub-Custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities
Depository. At its election, the Trust shall be subrogated to
the rights of the Custodian with respect to any claim against
a Book-Entry System or Securities Depository or any other
person from any loss or damage to the Funds arising from the
use of such Book-Entry System or Securities Depository, if
and to the extent that the Funds have not been made whole for
any such loss or damage.
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3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or
any Sub-Custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in
Section 3.9 below or in proper form for transfer, or if
the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in
accordance with the conditions set forth in Section 3.5
above; (ii) in the case of options on Securities,
against delivery to the Custodian (or such Sub-
Custodian) of such receipts as are required by the
customs prevailing among dealers in such options; (iii)
in the case of futures contracts and options on futures
contracts, against delivery to the Custodian (or such
Sub-Custodian) of evidence of title thereto in favor of
the Fund or any nominee referred to in Section 3.9
below; and (iv) in the case of repurchase or reverse
repurchase agreements entered into between the Trust
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and a bank which is a member of the Federal Reserve System or
between the Trust and a primary dealer in U.S. Government
securities, against delivery of the purchased Securities
either in certificate form or through an entry crediting the
Custodian's account at a Book-Entry System or Securities
Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.7(f) below, of Securities owned by the
Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
administration, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole
or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a
broker-dealer registered under the 1934 Act and a
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member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
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3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt
of Proper Instructions, the Custodian shall release and deliver Securities
from a Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund
but only against receipt of payment therefor in cash,
by certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer
into the name of the Fund, the Custodian or any
Sub-Custodian appointed pursuant to Section 3.3 above,
or of any nominee or nominees of any of the foregoing,
or (ii) for exchange for a different number of
certificates or other evidence representing the same
aggregate face amount or number of units; provided
that, in any such case, the new Securities are to be
delivered to the Custodian;
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(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case,
the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by the Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by
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the Trust, but only against receipt by the Custodian of
the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Trust;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a
broker-dealer registered under the 1934 Act and a
member of the NASD, relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any
similar organization or organizations) regarding escrow
or other arrangements in connection with transactions
by the Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy
of a resolution of the Board of Trustees, certified by
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an Officer, specifying the Securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such
Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise
instructed by the Trust, the Custodian shall with respect to all Securities
held for a Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either
by law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the
Internal Revenue Service ("IRS")
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and to the Trust at such time, in such manner and
containing such information as is prescribed by the
IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for a Fund may
be registered in the name of such Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book- Entry System, Securities Depository or any
nominee of either thereof. The Trust shall 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 any of the
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nominees hereinabove referred to or in the name of a Book-Entry System or
Securities Depository, any Securities registered in the name of a Fund.
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Funds, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Funds as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated
thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized
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officers, employees or agents of the Trust and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be maintained by
Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust
with a daily activity statement by Fund and a summary of all transfers to or
from each Fund Custody Account on the day following such transfers. At least
monthly and from time to time, the Custodian shall furnish the Trust with a
detailed statement, by Fund, of the Securities and moneys held by the Custodian
and the Sub-Custodians for the Funds under this a Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such Securities.
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3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian shall promptly
deliver to the Trust all information received by the Custodian and pertaining to
Securities being held by the Funds with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit B. If the Trust desires to
take action with respect to any tender offer, exchange offer or other similar
transaction, the Trust shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant information for
any Security which has unique put/option provisions at least five Business Days
prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUNDS
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities
for a Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the Fund for which the purchase was made, (b) the name of the issuer or
writer of such Securities, and the title or other description thereof, (c) the
number of shares, principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the name of the
person to whom such amount is
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payable. The Custodian shall upon receipt of such Securities purchased by a Fund
pay out of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for a Fund, if in the relevant Fund Custody Account
there is insufficient cash available to the Fund for which such purchase was
made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt of the Securities
purchased but in the absence of specified Written Instructions to so pay in
advance, the Custodian shall be liable to the Fund for such Securities to the
same extent as if the Securities had been received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a
Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the Fund for which the sale was made, (b) the name of the issuer or writer
of such Securities, and the title or other description thereof, (c) the number
of Shares, principal amount (and accrued interest, if any), or other units sold,
(d) the date of sale and settlement, (e) the sale price per unit, (f) the total
amount payable upon such sale, and (g) the person to whom such Securities are to
be delivered. Upon
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receipt of the total amount payable to the Fund as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund for which such Securities
were delivered shall bear the risk that final payment for such Securities may
not be made or that such Securities may be returned or otherwise held or
disposed of by or through the person to whom they were delivered, and the
Custodian shall have no liability for any for the foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from
time to time, the Custodian may credit the relevant Fund Custody Account, prior
to actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of
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the Fund. Any such credit shall be conditional upon actual receipt by Custodian
of final payment and may be reversed if final payment is not actually received
in full. The Custodian may, in its sole discretion and from time to time, permit
a Fund to use funds so credited to its Fund Custody Account in anticipation of
actual receipt of final payment. Any such funds shall be repayable immediately
upon demand made by the Custodian at any time prior to the actual receipt of all
final payments in anticipation of which funds were credited to the Fund Custody
Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to facilitate
the settlement of a Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 TRANSFER OF FUNDS. From such funds as may be available for the
purpose in the relevant Fund Custody Account, and upon receipt of Proper
Instructions specifying that the funds are required to redeem Shares of a Fund,
the Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Trust may designate with respect to such amount in such
Proper Instructions.
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5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD
(or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in
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connection with securities options purchased or written by the
Fund or in connection with financial futures contracts (or
options thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities
made by the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.
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ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust or any Fund for any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim unless
such loss, damage, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any Sub-Custodian
appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely
on and may act upon advice of counsel on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall promptly notify the Trust of any action taken or omitted by
the Custodian pursuant to advice of counsel. The Custodian shall not be under
any obligation at any time to ascertain whether the Trust or a Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or bylaws, or its investment objectives and policies
as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to a Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or
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its agents actually receive such cash or collect on such instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such Securities are in
default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 CO-OPERATION. The Custodian shall cooperate with and supply
necessary information, by Fund, to the entity or entities
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appointed by the Trust to keep the books of account of the Funds and/or compute
the value of the assets of the Funds. The Custodian shall take all such
reasonable actions as the Trust may from time to time request to enable the
Trust to obtain, from year to year, favorable opinions from the Trust's
independent accountants with respect to the Custodian's activities hereunder in
connection with (a) the preparation of the Trust's reports on Form N-1A and Form
N-SAR and any other reports required by the Securities and Exchange Commission,
and (b) the fulfillment by the Trust of any other requirements of the Securities
and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY TRUST. The Trust shall indemnify and hold
harmless the Custodian and any Sub-Custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such Sub-Custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
Sub-Custodian (i) at
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the request or direction of or in reliance on the advice of the Trust, or (ii)
upon Proper Instructions, or (c) generally, from the performance of its
obligations under this Agreement or any sub-custody agreement with a
Sub-Custodian appointed pursuant to Section 3.3 above, provided that neither the
Custodian nor any such Sub-Custodian shall be indemnified and held harmless from
and against any such loss, damage, cost, expense, liability or claim arising
from the Custodian's or such Sub-Custodian's negligence, bad faith or willful
misconduct.
8.2 INDEMNIFICATION BY CUSTODIAN. The Custodian shall indemnify and
hold harmless the Trust from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence, bad faith or willful misconduct of the Custodian or
any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity
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therefor to the Custodian in an amount and form satisfactory to
the Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to a Fund
for any purpose, either at the Trust's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith or
willful misconduct), then, in any such event, any property at any time held for
the account of such Fund shall be security therefor, and should such Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to dispose of other assets of such Fund
to the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots;
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power failures; computer failure and any such circumstances beyond its
reasonable control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Funds in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of
its execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 TERMINATION. Either party 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 sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of
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acceptance by the successor custodian, on such specified date of termination (a)
deliver directly to the successor custodian all Securities (other than
Securities held in a Book-Entry System or Securities Depository) and cash then
owned by the Funds and held by the Custodian as custodian, and (b) transfer any
Securities held in a Book-Entry System or Securities Depository to an account of
or for the benefit of the Funds at the successor custodian, provided that the
Trust shall have paid to the Custodian all fees, expenses and other amounts to
the payment or reimbursement of which it shall then be entitled. Upon such
delivery and transfer, the Custodian shall be relieved of all obligations under
this Agreement. The Trust may at any time immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by regulatory authorities or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which (a) is a "bank"
as defined in the 1940 Act and (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, all Securities, cash and
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<PAGE>
other property held by Custodian under this Agreement and to transfer to an
account of or for the Funds at such bank or trust company all Securities of the
Funds held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Trust and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Funds are set forth in Exhibit C
attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
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 as provided in the Trust's Agreement and Declaration of
Trust, as from time to time amended. 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
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<PAGE>
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
above-mentioned Agreement and Declaration of Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
TO THE TRUST:
Lake Shore Family of Funds
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2041
TO CUSTODIAN:
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632-3016
Facsimile: (513) 632-4448
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
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<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for a Fund and such other printed matter as
merely identifies Custodian as custodian for one or more Funds. The Trust shall
submit printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
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<PAGE>
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: LAKE SHORE FAMILY OF FUNDS
______________________________ By:_____________________________
Its:
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<PAGE>
ATTEST: STAR BANK, N.A.
______________________________ By:____________________________
Its:
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<PAGE>
EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Fund Custody Accounts.
NAME SIGNATURE
Earl V. (Buck) Newsome, Jr. ______________________________
John F. Splain ______________________________
Robert G. Dorsey ______________________________
Mark J. Seger ______________________________
M. Kathleen Leugers ______________________________
<PAGE>
ADMINISTRATION AGREEMENT
AGREEMENT dated as of ___________, 19___ between the Lake
Shore Family of Funds, an Ohio business trust (the "Trust"), and
Countrywide Fund Services, Inc. ("Countrywide"), an Ohio
corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of
Countrywide to serve as its administrative agent; and
WHEREAS, Countrywide wishes to provide such services under
the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
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<PAGE>
F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Investment Advisory Agreements in effect;
and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which Countrywide is
to act as plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of the Trustees of the
Trust, Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide shall coordinate
the preparation of (i) tax returns, (ii) reports to shareholders of the Trust,
(iii) reports to and filings with the SEC and state securities authorities
including preliminary and definitive proxy materials, post-effective amendments
to the Trust's registration statement, and the Trust's Form N-SAR, and (iv)
necessary materials for Board of Trustees' meetings unless prepared by other
parties under agreement with the Trust. Countrywide shall provide personnel to
serve as officers of the Trust if so elected by the Board of Trustees; provided,
however, that the Trust shall reimburse Countrywide for the reasonable
out-of-pocket expenses incurred by such personnel in attending Board of
Trustees' meetings and shareholders' meetings of the Trust.
4. RECORDKEEPING AND OTHER INFORMATION.
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall
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<PAGE>
make available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit and inspection by
the Trust, any person retained by the Trust, or any regulatory agency having
authority over the Trust.
5. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
6. COMPENSATION.
For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee at the annual rate of .15% of
such series' average daily net assets up to $50 million; .125% of such assets
from $50 to $100 million; and .10% of such assets in excess of $100 million;
provided, however, that the minimum fee shall be $1,000 per month for each
series.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
8. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent, and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
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<PAGE>
9. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed by
it to be accurate and reliable. Except as may otherwise be required by the 1940
Act and the rules thereunder, neither Countrywide nor its shareholders,
officers, directors, employees, agents, control persons or affiliates of any
thereof shall be subject to any liability for, or any damages, expenses or
losses incurred by the Trust in connection with, any error of judgment, mistake
of law, any act or omission connected with or arising out of any services
rendered under or payments made pursuant to this Agreement or any other matter
to which this Agreement relates, except by reason of willful misfeasance, bad
faith or gross negligence on the part of any such persons in the performance of
the duties of Countrywide under this Agreement or by reason of reckless
disregard by any of such persons of the obligations and duties of Countrywide
under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
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<PAGE>
10. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by Countrywide, (2) by vote, cast in person at
a meeting called for the purpose, of a majority of the Trust's Trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
11. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
12. LIMITATION OF LIABILITY.
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 bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the
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<PAGE>
Trust, acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
13. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
14. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
15. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Lake Shore Family of Funds
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
Attention: Earl V. (Buck) Newsome, Jr.
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 15. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
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<PAGE>
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
16. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
17. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
18. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
20. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LAKE SHORE FAMILY OF FUNDS
By:_____________________________
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:_____________________________
Its: President
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<PAGE>
ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated as of ____________, 19___ between the Lake
Shore Family of Funds, an Ohio business trust (the "Trust"), and
Countrywide Fund Services, Inc. ("Countrywide"), an Ohio
corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
provide the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
Countrywide will calculate the net asset value of each series
of the Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's current prospectus and statement of additional
information, once daily as of the time selected by the Trust's Board of
Trustees. Countrywide will prepare and maintain a daily valuation of all
securities and other assets of the Trust in accordance with instructions from a
designated officer of the Trust or its investment adviser and in the manner set
forth in the Trust's current prospectus and statement of additional information.
In valuing securities of the Trust, Countrywide may contract with, and rely upon
market quotations provided by, outside services.
3. BOOKS AND RECORDS.
Countrywide will maintain and keep current the general ledger
for each series of the Trust, recording all income and expenses, capital share
activity and security transactions of the Trust. Countrywide will maintain such
further books and records
<PAGE>
as are necessary to enable it to perform its duties under this Agreement, and
will periodically provide reports to the Trust and its authorized agents
regarding share purchases and redemptions and trial balances of each series of
the Trust. Countrywide will prepare and maintain complete, accurate and current
all records with respect to the Trust required to be maintained by the Trust
under the Internal Revenue Code of 1986, as amended (the "Code"), and under the
rules and regulations of the 1940 Act, and will preserve said records in the
manner and for the periods prescribed in the Code and the 1940 Act. The
retention of such records shall be at the expense of the Trust.
All of the records prepared and maintained by Countrywide pursuant to
this Section 3 which are required to be maintained by the Trust under the Code
and the 1940 Act will be the property of the Trust. In the event this Agreement
is terminated, all such records shall be delivered to the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
Countrywide shall process each request received from the Trust
or its authorized agents for payment of the Trust's expenses. Upon receipt of
written instructions signed by an officer or other authorized agent of the
Trust, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
Countrywide shall maintain such records within its control and
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
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<PAGE>
8. FEES.
For the performance of the services under this Agreement, each
series of the Trust shall pay Countrywide a monthly fee in accordance with the
schedule attached hereto as Schedule A. The fees with respect to any month shall
be paid to Countrywide on the last business day of such month. The Trust shall
also promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
10. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent, and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
11. EQUIPMENT FAILURES.
Countrywide shall take all steps necessary to minimize or
avoid service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
12. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed
by it to be accurate and reliable. Except as may otherwise be required by the
1940 Act and the rules thereunder, neither Countrywide nor its shareholders,
officers, directors,
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<PAGE>
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of Countrywide under
this Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder, or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of those entities.
C. Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
13. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in
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<PAGE>
effect for two years from that date and shall continue in force from year to
year thereafter, but only so long as such continuance is approved (1) by
Countrywide, (2) by vote, cast in person at a meeting called for the purpose, of
a majority of the Trust's Trustees who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party, and (3) by
vote of a majority of the Trust's Board of Trustees or a majority of the Trust's
outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
14. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
15. LIMITATION OF LIABILITY.
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 bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose
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any liability on any of them personally, but shall bind only the
trust property of the Trust.
16. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
17. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said 1940
Act. In addition, where the effect of a requirement of the 1940 Act, reflected
in any provision of this Agreement, is revised by rule, regulation or order of
the Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
18. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Lake Shore Family of Funds
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
Attention: Earl V. (Buck) Newsome, Jr.
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 18. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer
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back if by telex, telefax or other telegraphic method; and (d) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
19. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
20. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
22. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
23. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LAKE SHORE FAMILY OF FUNDS
By:_____________________________
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:_____________________________
Its: President
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SCHEDULE A
COMPENSATION
Each series of the Trust will pay Countrywide a monthly fee, according
to the average monthly net assets of such series during such month, as follows:
MONTHLY FEE AVERAGE NET ASSETS DURING MONTH
$2,000 $0 - $ 50,000,000
$2,500 $50,000,000 - $100,000,000
$3,000 $100,000,000 - $200,000,000
$4,000 $200,000,000 - $300,000,000
$5,000 + .001% of
average net assets Over $300,000,000
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TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
AGREEMENT dated as of __________, 19___ between the Lake Shore Family
of Funds, an Ohio business trust (the "Trust"), and Countrywide Fund Services,
Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
serve as its transfer, dividend disbursing, shareholder service and plan agent;
and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities and
Exchange Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
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F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Investment Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in the
future by the Trust and for which Countrywide is to act as
plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
Countrywide shall record the issuance of shares of the Trust
and maintain pursuant to applicable rules of the SEC a record of the total
number of shares of the Trust which are authorized, issued and outstanding,
based upon data provided to it by the Trust. Countrywide shall also provide the
Trust on a regular basis or upon reasonable request the total number of shares
which are authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to Countrywide of certificates, if any, in proper form for transfer,
Countrywide shall approve such transfer and shall take all necessary steps to
effectuate the transfer as indicated in the transfer request. Upon approval of
the transfer, Countrywide shall notify the Trust in writing of each such
transaction and shall make appropriate entries on the shareholder records
maintained by Countrywide.
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, Countrywide will countersign and mail,
by insured first class mail, a share certificate to the investor at his address
as set forth on the transfer books of the Trust, subject to any other
instructions for delivery of certificates representing newly purchased shares
and subject to the limitation that no certificates representing newly purchased
shares shall be mailed to the investor until the cash purchase price of such
shares has
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been collected and credited to the account of the Trust maintained by the
Custodian. The Trust shall supply Countrywide with a sufficient supply of blank
share certificates and from time to time shall renew such supply upon request of
Countrywide. Such blank share certificates shall be properly signed, manually
or, if authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, Countrywide may continue to countersign certificates which bear
the manual or facsimile signature of such officer until otherwise directed by
the Trust. In case of the alleged loss or destruction of any share certificate,
no new certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to Countrywide and the Trust, and
issued by a surety company satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust or Countrywide Investments, Inc., as underwriter of the Trust (the
"Underwriter"), Countrywide shall stamp the check or instrument with the date of
receipt, determine the amount thereof due the Trust and shall forthwith process
the same for collection. Upon receipt of notification of receipt of funds
eligible for share purchases in accordance with the Trust's then current
prospectus and statement of additional information, Countrywide shall notify the
Trust, at the close of each business day, in writing of the amount of said funds
credited to the Trust and deposited in its account with the Custodian, and shall
similarly notify the Underwriter of the amount of said funds credited to the
Underwriter and deposited in its account with its designated bank.
7. PURCHASE ORDERS.
Upon receipt of an order for the purchase of shares of the
Trust, accompanied by sufficient information to enable Countrywide to establish
a shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.
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<PAGE>
8. RETURNED CHECKS.
In the event that Countrywide is notified by the Trust's
Custodian that any check or other order for the payment of money is returned
unpaid for any reason, Countrywide will:
A. Give prompt notification to the Trust and the Underwriter
of the non-payment of said check;
B. In the absence of other instructions from the Trust or the
Underwriter, take such steps as may be necessary to redeem any shares purchased
on the basis of such returned check and cause the proceeds of such redemption
plus any dividends declared with respect to such shares to be credited to the
account of the Trust and to request the Trust's Custodian to forward such
returned check to the person who originally submitted the check; and
C. Notify the Trust and Underwriter of such actions and
correct the Trust's records maintained by Countrywide pursuant to this
Agreement.
9. SALES CHARGE.
In computing the number of shares to credit to the account of
a shareholder, Countrywide will calculate the total of the applicable sales
charges with respect to each purchase as set forth in the Trust's current
prospectus and statement of additional information and in accordance with any
notification filed with respect to combined and accumulated purchases.
Countrywide will also determine the portion of each sales charge payable by the
Underwriter to the dealer of record participating in the sale in accordance with
such schedules as are from time to time delivered by the Underwriter to
Countrywide; provided, however, that Countrywide shall have no liability
hereunder arising from the incorrect selection by Countrywide of the gross rate
of sales charges except that this exculpation shall not apply in the event the
rate is specified by the Underwriter or the Trust and Countrywide fails to
select the rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish Countrywide with appropriate evidence
of trustee action authorizing the declaration of dividends and other
distributions. Countrywide shall establish procedures in accordance with the
Trust's then current prospectus and statement of additional information and with
other authorized actions of the Trust's Board of Trustees under which it will
have available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so
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requests, invest the dividends and other distributions in full and fractional
shares in accordance with the Trust's then current prospectus and statement of
additional information. If a shareholder has elected to receive dividends or
other distributions in cash, then Countrywide shall disburse dividends to
shareholders of record in accordance with the Trust's then current prospectus
and statement of additional information. Countrywide shall, on or before the
mailing date of such checks, notify the Trust and the Custodian of the estimated
amount of cash required to pay such dividend or distribution, and the Trust
shall instruct the Custodian to make available sufficient funds therefor in the
appropriate account of the Trust. Countrywide shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited. When
requested by the Trust, Countrywide shall prepare and file with the Internal
Revenue Service, and when required, shall address and mail to shareholders, such
returns and information relating to dividends and distributions paid by the
Trust as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations.
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
Countrywide shall, at least annually, furnish in writing to
the Trust the names and addresses, as shown in the shareholder accounts
maintained by Countrywide, of all shareholders for which there are, as of the
end of the calendar year, dividends, distributions or redemption proceeds for
which checks or share certificates mailed in payment of distributions have been
returned. Countrywide shall use its best efforts to contact the shareholders
affected and to follow any other written instructions received from the Trust
concerning the disposition of any such unclaimed dividends, distributions or
redemption proceeds.
12. REDEMPTIONS AND EXCHANGES.
A. Countrywide shall process, in accordance with the Trust's
then current prospectus and statement of additional information, each order for
the redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in
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<PAGE>
federal funds to the bank account designated by the shareholder, or (c)
effectuate such other redemption procedures which are authorized by the Trust's
Board of Trustees or its then current prospectus and statement of additional
information. The requirements as to instruments of transfer and other
documentation, the applicable redemption price and the time of payment shall be
as provided in the then current prospectus and statement of additional
information, subject to such supplemental instructions as may be furnished by
the Trust and accepted by Countrywide. If Countrywide or the Trust determines
that a request for redemption does not comply with the requirements for
redemptions, Countrywide shall promptly notify the shareholder indicating the
reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, Countrywide, in accordance with the then
current prospectus and statement of additional information and exchange rules of
the Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. Countrywide shall notify the Trust, the Custodian and the
Underwriter on each business day of the amount of cash required to meet payments
made pursuant to the provisions of this Paragraph 12, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by telephone or other methods shall be established by mutual agreement
between Countrywide and the Trust consistent with the Trust's then current
prospectus and statement of additional information.
D. The authority of Countrywide to perform its
responsibilities under Paragraph 7, Paragraph 10, and this Paragraph 12 shall be
suspended with respect to any series of the Trust upon receipt of notification
by it of the suspension of the determination of such series' net asset value.
13. AUTOMATIC WITHDRAWAL PLANS.
Countrywide will process automatic withdrawal orders pursuant
to the provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Trust.
Payments upon such withdrawal order shall be made by Countrywide from the
appropriate account maintained by the Trust with the Custodian on approximately
the last business day of each month in which a payment has been requested, and
Countrywide will withdraw from a shareholder's account and present for
repurchase or redemption as
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many shares as shall be sufficient to make such withdrawal payment pursuant to
the provisions of the shareholder's withdrawal plan and the current prospectus
and statement of additional information of the Trust. From time to time on new
automatic withdrawal plans a check for payment date already past may be issued
upon request by the shareholder.
14. LETTERS OF INTENT.
Countrywide will process such letters of intent for investing
in shares of the Trust as are provided for in the Trust's current prospectus and
statement of additional information. Countrywide will make appropriate deposits
to the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
15. WIRE-ORDER PURCHASES.
Countrywide will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by each such
dealer by the close of business on the business day following receipt of such
orders by Countrywide or the Underwriter, with copies to the Underwriter. Upon
receipt of any check drawn or endorsed to the Trust (or Countrywide, as agent)
or otherwise identified as being payment of an outstanding wire-order,
Countrywide will stamp said check with the date of its receipt and deposit the
amount represented by such check to Countrywide's deposit accounts maintained
with the Custodian. Countrywide will compute the respective portions of such
deposit which represent the sales charge and the net asset value of the shares
so purchased, will cause the Custodian to transfer federal funds in an amount
equal to the net asset value of the shares so purchased to the Trust's account
with the Custodian, and will notify the Trust and the Underwriter before noon of
each business day of the total amount deposited in the Trust's deposit accounts,
and in the event that payment for a purchase order is not received by
Countrywide or the Custodian on the tenth business day following receipt of the
order, will prepare an NASD "notice of failure of dealer to make payment" and
forward such notification to the Underwriter.
16. OTHER PLANS.
Countrywide will process such accumulation plans, group
programs and other plans or programs for investing in shares of the Trust as are
now provided for in the Trust's current prospectus and statement of additional
information and will act as plan agent for shareholders pursuant to the terms of
such plans and programs duly executed by such shareholders.
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<PAGE>
17. RECORDKEEPING AND OTHER INFORMATION.
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
person retained by the Trust, or any regulatory agency having authority over the
Trust.
18. SHAREHOLDER RECORDS.
Countrywide shall maintain records for each shareholder
account showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
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I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case of a
foreign account or any other account for which withholding is
required by the Internal Revenue Code of 1986, as amended; and
K. Any information required in order for Countrywide to perform
the calculations contemplated under this Agreement.
19. TAX RETURNS AND REPORTS.
Countrywide will prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies and, if required,
mail to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
20. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
21. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, Countrywide shall arrange for the Trust's
investment adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
22. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
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23. SHAREHOLDER SERVICE AND CORRESPONDENCE.
Countrywide will provide and maintain adequate personnel,
records and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders. Countrywide will answer
written correspondence from shareholders relating to their share accounts and
such other written or oral inquiries as may from time to time be mutually agreed
upon, and Countrywide will notify the Trust of any correspondence or inquiries
which may require an answer from the Trust.
24. PROXIES.
Countrywide shall assist the Trust in the mailing of proxy
cards and other material in connection with shareholder meetings of the Trust,
shall receive, examine and tabulate returned proxies and shall, if requested by
the Trust, provide at least one inspector of election to attend and participate
as required by law in shareholder meetings of the Trust.
25. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
26. COMPENSATION.
For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee in accordance with the
schedule attached hereto as Schedule A. The Trust shall promptly reimburse
Countrywide for any out-of-pocket expenses and advances which are to be paid by
the Trust in accordance with Paragraph 27.
27. EXPENSES.
Countrywide shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) the use of
data processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 27 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of
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outside pricing services, use of outside mailing firms, necessary outside record
storage, media for storage of records (e.g., microfilm, microfiche, computer
tapes), printing, confirmations and any other shareholder correspondence and any
and all assessments, taxes or levies assessed on Countrywide for services
provided under this Agreement. Postage for mailings of dividends, proxies,
reports and other mailings to all shareholders shall be advanced to Countrywide
three business days prior to the mailing date of such materials.
28. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
29. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent, and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
30. EQUIPMENT FAILURES.
Countrywide shall take all steps necessary to minimize or
avoid service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
31. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably
believed by it to be accurate and reliable. Except as may
otherwise be required by the 1940 Act and the rules thereunder,
neither Countrywide nor its shareholders, officers, directors,
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employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of Countrywide under
this Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. The Trust shall indemnify and hold harmless Countrywide,
its directors, officers, employees, shareholders, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of any and every
nature which Countrywide may sustain or incur or which may be asserted against
Countrywide by any person by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide in good faith in reliance upon any
certificate, instrument, order or share certificate reasonably believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
32. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force
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from year to year thereafter, but only so long as such continuance is approved
(1) by Countrywide, (2) by vote, cast in person at a meeting called for the
purpose, of a majority of the Trust's Trustees who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such party,
and (3) by vote of a majority of the Trust's Board of Trustees or a majority of
the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
33. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
34. LIMITATION OF LIABILITY.
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 bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
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35. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
37. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Lake Shore Family of Funds
403 Vine Street, 2nd Floor
Cincinnati, Ohio 45202
Attention: Earl V. (Buck) Newsome, Jr.
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 37. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
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38. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
39. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
40. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
41. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
42. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LAKE SHORE FAMILY OF FUNDS
By:_____________________________
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:_____________________________
Its: President
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SCHEDULE A
COMPENSATION
SERVICES FEE
As Transfer Agent,
Dividend Disbursing Agent
and Shareholder Servicing Agent: (Per Account)
Equity Fund Payable monthly at
rate of $20.00/year;
subject to a minimum
of $1,200 per month
Balanced Fund Payable monthly at
rate of $20.00/year;
subject to a minimum
of $1,200 per month
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<PAGE>
AGREEMENT RELATING TO INITIAL CAPITAL
______________, 1997
LAKE SHORE FAMILY OF FUNDS 403 Vine Street, 2nd Floor Cincinnati, Ohio 45202
Dear Sir/Madam:
In conjunction with the purchase by ____________, (the "Purchaser") of
________ shares of beneficial interest of Equity Fund and ________ shares of
beneficial interest of the Balanced Fund of the Lake Shore Family of Funds (the
"Shares"), the Purchaser hereby represents that it is acquiring the Shares for
investment with no intention of reselling or otherwise distributing the Shares.
The Purchaser hereby further agrees that any transfer of any of the Shares or
any interest therein shall be subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to
you prior to the time of transfer, a written description of
the proposed transfer specifying its nature and consequence
and giving the name of the proposed transferee.
2. You shall have obtained from your counsel a written opinion
stating whether in the opinion of such counsel the proposed
transfer may be effected without registration under the
Securities Act of 1933. If such opinion states that such
transfer may be so effected, the Purchaser shall then be
entitled to transfer the Shares in accordance with the terms
specified in its description of the transaction to you.
If such opinion states that the proposed transfer may not be
so effected, the Purchaser will not be entitled to transfer
the Shares unless the Shares are registered.
<PAGE>
The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the Shares, including the imposition of
a requirement that any transferee of the Shares sign a letter agreement similar
to this one. The Purchaser agrees that in the event the Shares are redeemed by
the Purchaser or its successors or any current holder prior to the complete
amortization of organization expenses by the Equity Fund or the Balanced Fund,
the redemption proceeds payable in respect of the Shares so redeemed shall be
reduced by the pro-rata share (based on the proportionate share of the Shares
redeemed to the total number of the Shares outstanding at the time of
redemption) of the then unamortized deferred organization expenses as of the
date of such redemption.
Very truly yours,
By: ___________________________
Its:
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PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1
WHEREAS, Lake Shore Family of Funds (the "Trust"), a business trust
organized under the laws of the State of Ohio, engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest without par value (the "Shares"), which may be divided
into two or more Series of Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the 1940 Act, that there is
a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the 1940 Act, on the following terms and conditions:
1. DISTRIBUTION ACTIVITIES. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Shares, which activities may include, but are not
limited to, the following: (a) payments to securities dealers and others who are
engaged in the sale of Shares and who may be advising shareholders of the Trust
regarding the purchase, sale or retention of Shares; (b) expenses of maintaining
personnel (including personnel of organizations with which the Trust has entered
into agreements related to this Plan) who engage in or support distribution of
Shares or who render shareholder support services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and
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<PAGE>
providing such other shareholder services as the Trust may reasonably request;
(c) formulating and implementing marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (d) preparing, printing
and distributing sales literature; (e) preparing, printing and distributing
prospectuses and statements of additional information and reports of the Trust
for recipients other than existing shareholders of the Trust; and (f) obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
related to the distribution of Shares, either directly or through other persons
with which the Trust has entered into agreements related to this Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Trust
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed in any fiscal year an amount calculated at the rate of
.25% of the average daily net asset value of any Series of the Trust. Such
payments for distribution activities may be made directly by the Trust or the
Trust's investment adviser or principal underwriter may incur such expenses and
obtain reimbursement from the Trust.
3. TERM AND TERMINATION. (a) This Plan shall become effective on the
date hereof. Unless terminated as herein provided, this Plan shall continue in
effect for one year from the date hereof and shall continue in effect for
successive periods of one year thereafter, but only so long as each such
continuance is specifically approved by votes of a majority of both (i) the
Trustees of the Trust and (ii) the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on such approval.
(b) This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Trust.
4. AMENDMENTS. This Plan may not be amended to increase materially the
amount of expenditures provided for in Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of the
Trust (as defined in the 1940 Act), and no material amendment to this Plan shall
be made unless approved in the manner provided for annual renewal of this Plan
in Section 3(a) hereof.
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5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect,
the selection and nomination of Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust shall be committed to the discretion of
the Trustees who are not interested persons of the Trust.
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and any related agreement
and the purposes for which such expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreements and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
8. LIMITATION OF LIABILITY. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of the State of Ohio and notice
is hereby given that this Plan is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the obligations of this
instrument are not binding upon the Trustees or shareholders of the Trust
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.
Dated:__________________
Attest: LAKE SHORE FAMILY OF FUNDS
__________________________ By: __________________________
Secretary President
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