As filed with the Securities and Exchange Commission on March 1, 1999
File Nos. 333-53837 and 811-08793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 1
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 2
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
(207) 774-7455
Copies to:
Wayne E. Tumlin, Esquire
Bernstein, Shur, Sawyer and Nelson
100 Middle Street
Portland, Maine 04104-5029
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/X/ on May 1, 1999 pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))
PART A
<TABLE>
<CAPTION>
Form N-1A Registration Statement Caption Location in Prospectus
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Item No.
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<S> <C> <C>
Item 1. Front and Back Cover Pages Cover Pages
Item 2. Risk/Return Summary: Investments, Risks Risk/Return Summary
and Performance
Item 3. Risk/Return Summary: Fee Table Fund Expenses
Item 4. Investment Objectives, Principal Investment Objectives; Investment Policies;
Investment Strategies, Related Risks Investment Risks
Item 5. Management's Discussion of Fund Performance Inapplicable (Included in Annual Report)
Item 6. Management, Organization, and Capital Management of the Trust; Year 2000 Disclosure
Structure
Item 7. Shareholder Information Size Limitations; Dividends, Distributions and
Taxes; Net Asset Value Per Share; Opening an
Account and Purchasing Shares; Choosing a
Distribution Option; Important Account
Information; Redeeming Your Shares; Transferring
Ownership; Other Services
Item 8. Distribution Arrangements Inapplicable
Item 9. Financial Highlights Information Financial Highlights
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(a))
PART B
Form N-1A Registration Statement Caption Location in Statement of Additional Information
- --------- ------------------------------ -----------------------------------------------
Item No.
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Item 10. Cover Page and Table of Contents Cover Page; Table of Contents
Item 11. Fund History Description of the Trust
Item 12. Description of the Fund and Its Investment Policies and Limitations; Risk Factors
Investments and Risks and Special Considerations
Item 13. Management of the Fund Management of the Trust
Item 14. Control Persons and Principal Holders of Principal Holders of Shares
Securities
Item 15. Investment Advisory and Other Services Management of the Trust; Investment Advisory
Services; Countrywide Fund Services, Inc.;
Custodian; Independent Accountants
Item 16. Brokerage Allocation and Other Practices Portfolio Transactions
Item 17. Capital Stock and Other Securities Description of the Trust
Item 18. Purchase, Redemption and Pricing of Shares Pricing of Shares Being Offered; Redemptions in
Kind
Item 19. Taxation of the Fund Taxation
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Data Historical Performance Information
Item 22. Financial Statements Annual Report
</TABLE>
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.
<PAGE>
PROSPECTUS
May 1, 1999
[LOGO]
THE REvest VALUE FUND
A No-Load Mutual Fund
Managed in Maine
MANAGED BY
EBRIGHT INVESTMENTS, INC.
(FORMERLY ROYCE, EBRIGHT & ASSOCIATES, INC.)
A SERIES OF THE WINTER HARBOR FUND
<PAGE>
THE REvest VALUE FUND
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PROSPECTUS - MAY 1, 1999
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NEW ACCOUNT AND GENERAL INFORMATION: INVESTOR INFORMATION -- 1-800-277-5573
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SHAREHOLDER SERVICES -- 1-877-4REVEST (877-473-8378)
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INVESTMENT OBJECTIVES AND POLICIES
The REvest Value Fund (the "Fund") primarily seeks long-term growth and
secondarily current income by investing in a broadly diversified portfolio of
common stocks and convertible securities. Prospective portfolio investments are
selected on a value basis and are primarily limited to small and medium-sized
companies viewed by the Fund's investment adviser as having attractive financial
characteristics and/or "vitality factors." Vitality factors are those factors
that should, in the investment adviser's judgment, allow a company to build
future, incremental value for shareholders
The Fund is a no-load series of The Winter Harbor Fund (the "Trust"), a
diversified open-end management investment company.
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ABOUT THIS PROSPECTUS
This Prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records. The Securities and
Exchange Commission has not approved or disapproved these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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TABLE OF CONTENTS
Page
Risk/Return Summary
Fund Expenses
Investment Objectives
Investment Policies
Investment Risks
Management of the Trust
Year 2000 Disclosure
Size Limitations
Dividends, Distributions and Taxes
Net Asset Value Per Share
Financial Highlights
SHAREHOLDER GUIDE
Opening an Account and Purchasing Shares
Choosing a Distribution Option
Important Account Information
Redeeming Your Shares
Transferring Ownership
Other Services
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A Series of The Winter Harbor Fund
<PAGE>
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RISK/RETURN SUMMARY
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The REvest Value Fund primarily seeks long-term growth and secondarily current
income.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Fund invests primarily in a diversified portfolio of common stocks and
securities convertible into common stocks of small and medium-sized companies.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The return on and value of an investment in the Fund will fluctuate in response
to stock market movements. Stocks and other equity securities are subject to
market risks and fluctuations in value due to earnings, economic conditions and
other factors beyond the control of the Fund's investment adviser. As a result,
there is a risk that you may lose money by investing in the Fund.
The Fund will typically invest a substantial portion of its assets in small and
medium-sized companies, which may be less liquid and more volatile than
investments in larger companies.
PERFORMANCE SUMMARY
The bar chart and performance table shown below provide an indication of the
risks of investing in the Fund by showing the changes in the performance of the
Fund from year to year since the Fund's inception and by showing how the average
annual returns of the Fund compare to those of broad-based securities market
indices. How the Fund has performed in the past is not necessarily an indication
of how the Fund will perform in the future.
[bar chart]
- -6.12% 23.50% 22.27% 16.23% -2.90%*
1998 1997 1996 1995 1994
* Represents the period from commencement of operations (August 1, 1994) through
December 31, 1994.
During the period shown in the bar chart, the highest return for a quarter was
11.94% during the quarter ended Sept. 30, 1997 and the lowest return for a
quarter was -15.37% during the quarter ended Sept. 30, 1998.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998
One Year Since Inception
(August 1, 1994)
The REvest Value Fund -6.12% 11.23%
S&P 500 Index(1) 28.58% 27.75%
Russell 2000 Index(2) -2.55% 14.83%
(1) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of common stocks frequently used as a general measure of stock market
performance. The Index's performance figures reflect changes of market prices
and quarterly reinvestment of all distributions.
(2) The Russell 2000 Index, prepared by the Frank Russell Company, tracks the
return of the common stocks of the 2,000 smallest out of the 3,000 largest
publicly traded U.S.-domiciled companies by market capitalization. The Russell
2000 tracks the return based on price appreciation or depreciation and includes
dividends.
2
<PAGE>
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FUND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee:
1 Year or More After Account Opened None*
Early Redemption Fee:
Less Than 1 Year After Account Opened 1.00%*
* The Fund's Custodian charges a wire transfer fee 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
(expenses that are deducted from Fund assets)
Management Fees 1.00%(A)
Distribution (12b-1) Fees None
Other Expenses .37%
-----
Total Annual Fund Operating Expenses 1.37%(B)
=====
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(A) After waivers of management fees, such fees were .93% for the fiscal year
ended December 31, 1998.
(B) After waivers of management fees, total Fund operating expenses were 1.30%
for the fiscal year ended December 31, 1998.
The Fund's investment adviser and sub-adviser have agreed to waive fees, in
equal amounts, in order to limit the Fund's expense ratio to 1.30% through
December 31, 1999. These waivers will terminate on December 31, 1999. For a
further discussion of these fees, see "Management of the Trust."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 YEAR $ 143
3 YEARS 434
5 YEARS 750
10 YEARS 1,646
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INVESTMENT OBJECTIVES
The Fund primarily seeks long-term growth and secondarily current income by
investing in a broadly diversified portfolio of common stocks and convertible
securities. Prospective portfolio investments are selected on a value basis and
are primarily limited to small and medium-sized companies viewed by the Fund's
investment adviser as having attractive financial characteristics and/or
"vitality factors." Vitality factors are those factors that should, in the
investment adviser's judgment, allow a company to build future, incremental
value for shareholders. Examples of such factors include an active acquisition
program, stock buy-back program and/or cost reduction program.
3
<PAGE>
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INVESTMENT POLICIES
The Fund invests on a "value" basis.
Ebright Investments, Inc. (formerly named Royce, Ebright & Associates, Inc.),
the Fund's investment adviser, uses a "value" method in managing the Fund's
assets. In its selection process, Ebright Investments, Inc. ("EII") considers a
company's cash flows, its balance sheet quality, an understanding of various
internal returns indicative of profitability and its growth prospects in trying
to relate such factors to the price of a given security. With regard to each
portfolio security in which the Fund invests, EII seeks to identify a "valuation
discrepancy" between the security's then current market price and its "business
worth". Business worth is what a knowledgeable buyer would pay for the entire
company, based on an appraisal of its financial characteristics and/or growth
prospects.
After this appraisal of value process is completed, EII then, in addition, seeks
to identify and evaluate "vitality factors", which are those characteristics of
a portfolio company that should result in the building of future value for
shareholders. Examples of such vitality factors include research and development
efforts, new products, new market development efforts, the redeployment of
underutilized assets, an active acquisition program, stock buy-back program,
cost reduction program and investments in new technologies or processes.
The portfolio, therefore, is a collection of securities that EII believes have
all been purchased at a discount to their real business worth and possess, in
addition, vitality factors that should allow them to build future incremental
value for shareholders. EII believes that profits can come both from the
continued success and growth of each portfolio company as well as the eventual
elimination of each security's valuation discrepancy.
The Fund invests primarily in small and medium-sized companies.
EII believes that there are many high quality companies in the "small-cap" and
"mid-cap" sectors that have above average growth prospects but are not widely
followed or understood by investors. EII seeks to identify and invest in such
companies when their securities can be purchased at appropriate discounts to
EII's assessment of their business worth.
In accordance with its objectives of seeking primarily long-term growth
(realized and unrealized) and secondarily current income, the Fund will normally
invest at least 90% of its assets in common stocks, convertible preferred stocks
and convertible bonds. At least 80% of these allowable securities will be
income-producing, and at least 80% of allowable securities will be issued by
companies with stock market capitalizations between $200 million and $2 billion
at the time of investment. The Fund will normally have a weighted average market
capitalization size in excess of $500 million. The remainder of the Fund's
assets may be invested in securities with lower or higher market
capitalizations, non-dividend paying common stocks and non-convertible fixed
income securities. The securities in which the Fund invests may be traded on
securities exchanges or in the over-the-counter market. While most of the Fund's
securities will be income-producing, the composite yield of the Fund's
securities may be either higher or lower than the composite yield of the stocks
in the S&P 500 Index.
The Fund may also invest in short-term fixed income securities.
The Fund may invest in short-term fixed income securities for temporary
defensive purposes, to invest uncommitted cash balances or to maintain liquidity
to meet shareholder redemptions. These securities consist of United States
Treasury bills, domestic bank certificates of deposit, high-quality commercial
paper and repurchase agreements collateralized by U.S. Government securities. In
a repurchase agreement, a bank sells a security to the Fund at one price and
agrees to repurchase it at the Fund's cost plus interest within a specified
period of seven or fewer days. In these transactions, which are, in effect,
secured loans by the Fund, the securities purchased by the Fund will have a
value equal to or in excess of the value of the repurchase agreement and will be
held by the Fund's custodian bank until repurchased. To the extent the Fund
implements a temporary defensive investment policy, its investment objectives
may not be achieved.
4
<PAGE>
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INVESTMENT RISKS
The Fund is subject to certain investment risks.
The Fund is designed for investors who are investing for the long term and
should not be used by "market timers." It is not intended for investors seeking
assured income or preservation of capital. Changes in market prices can occur at
any time. Accordingly, there is no assurance that the Fund will achieve its
investment objectives. When you redeem your shares, they may be worth more or
less than what you paid for them.
Because the Fund normally invests most, or a substantial portion, of its assets
in stocks, the value of the Fund's portfolio will be affected by changes in the
stock markets. Stock markets and stock prices can be volatile. Market action
will affect the Fund's net asset value per share, which fluctuates as the values
of the Fund's portfolio securities change. Not all stock prices change uniformly
or at the same time and not all stock markets move in the same direction at the
same time. Various factors can affect a stock's price (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, or changes in general economic conditions or in government
regulations affecting an industry). Not all of these factors can be predicted.
The Fund will typically invest a substantial portion of its assets in companies
with lower market capitalizations, which present higher near-term risks than
larger capitalization companies. Small and mid-capitalization stocks are more
likely to experience higher price volatility and may have limited liquidity
(which means that the Fund might have difficulty selling them at an acceptable
price when it wants to).
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MANAGEMENT OF THE TRUST
Trustees
The Trust's business and affairs are managed under the direction of its Board of
Trustees, for the benefit of the Trust's shareholders. The Trustee's names,
principal occupations and ownership of Fund shares as of February 5, 1999 are:
Shares Owned
------------
JENNIFER E. GOFF, see Investment Adviser section below 2,417.214
JUDITH D. FREYER, Vice President - Investments, Board of
Pensions of the Presbyterian Church (U.S.A.) None
EARL L. MUMMERT, Vice President, Conrad M. Siegel,
Inc. (Actuarial Firm) 5,397.518
VINCENT T. PHILLIPS, President, Phillips & Company, Inc.
(Registered Investment Adviser) 2,136.985
Investment Adviser
Ebright Investments, Inc. ("EII"), the Fund's investment adviser, is responsible
for the management of the Fund's portfolio of investments, subject to the
authority of the Board of Trustees. EII, located at 511 Congress Street,
Portland, Maine, is an independent investment advisory firm founded in 1994 and
is registered as an investment adviser with the Securities and Exchange
Commission. EII was formerly known as Royce, Ebright & Associates, Inc. EII was
the investment adviser to The REvest Growth & Income Fund, which commenced
operations as a series of The Royce Fund on August 1, 1994. Pursuant to a
reorganization that occurred on September 25, 1998, The REvest Growth & Income
Fund ceased to be a series of The Royce Fund and was reorganized into the Fund
as the sole series of the Trust. This reorganization consisted of the transfer
of all of the assets of The REvest Growth & Income Fund to the Fund in exchange
solely for shares of beneficial interest of the Fund, the assumption by the Fund
of all of the liabilities of The REvest Growth & Income Fund, and the
distribution of shares of the Fund to shareholders of The REvest Growth & Income
Fund upon liquidation of The REvest Growth & Income Fund.
5
<PAGE>
Jennifer E. Goff, President of EII, manages the Fund's portfolio. She has been a
director and a shareholder of EII since its inception. Jennifer succeeded her
father, Thomas R. Ebright, as President when Mr. Ebright passed away in 1997.
Prior to assuming the office of President, Ms. Goff was Vice President and
Assistant Portfolio Manager. Ms. Goff also worked full-time as a security
analyst at Royce & Associates, Inc. (formerly Quest Advisory Corp.) from July,
1993 to August, 1994 and then completed her graduate studies in Finance at
Columbia University (M.B.A., 1996). While Ms. Goff is responsible for EII's
investment management activities, EII has entered into a sub-advisory agreement
with Gouws Capital Management, Inc. to share resources in growing and managing
the Fund.
As compensation for its services to the Fund, EII is entitled to receive
advisory fees equal to 1.00% per annum of the first $50 million of the Fund's
average net assets and 0.75% per annum of any additional average net assets over
$50 million. These fees are payable monthly from the assets of the Fund.
Investment Sub-Adviser
EII has retained Gouws Capital Management, Inc. ("GCMI") to provide investment
sub-advisory and marketing support services to the Fund. GCMI, located at 511
Congress Street, Portland, Maine, is an independent investment advisory firm
founded in 1984 and is registered as an investment adviser with the Securities
and Exchange Commission. GCMI's principal and President, Johann H. Gouws, is not
engaged in any other business or profession other than his involvement in
establishing Acadia Trust, N.A. ("AT"), an affiliated trust company. GCMI
provides investment advisory services to AT, who acts as a custodian for GCMI's
approximately $700 million in client assets. GCMI has a value orientation and
emphasizes in-depth fundamental analysis and company visitation similar to EII.
Although EII alone will determine the investments that will be purchased,
retained or sold by the Fund, GCMI will assist EII in such determinations. GCMI
will also, at the direction of EII, be responsible for placing purchase and sell
orders for investments with broker-dealers, and for other related transactions.
GCMI has agreed to provide services in accordance with the Fund's investment
objectives, policies and restrictions.
As compensation for its services to the Fund, GCMI is entitled to receive
sub-advisory fees from EII equal to one-half of EII's net profit (net profit
means the advisory fee paid to EII minus (1) all of EII's expenses, including
Ms. Goff's salary and benefits, and (2) a preferential distribution equal to Ms.
Goff's salary and benefits paid to GCMI). Concurrent with the reorganization of
the Fund and as compensation for their part in AT's paying half the expenses
incurred in the reorganization, two of the principals of AT, Johann H. Gouws and
Richard E. Curran, Jr., received an aggregate of forty-eight percent (48%) of
the outstanding voting common stock of EII. Ms. Goff and her sister, Ellen E.
Carlton, own the remaining fifty-two percent (52%) of the outstanding voting
common stock of EII.
Administrator
Countrywide Fund Services, Inc. ("Countrywide"), located at 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202, serves as administrator, accounting services
agent and transfer agent to the Fund. Countrywide is a wholly-owned indirect
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending.
Distributor
CW Fund Distributors, Inc., located at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202, acts as distributor of the Fund's shares.
Custodian
Firstar Bank, N.A., located at 425 Walnut Street, Cincinnati, Ohio, 45202,
serves as custodian for the securities, cash and other assets of the Fund.
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YEAR 2000 DISCLOSURE
Like other mutual funds, financial and other business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by EII and other service providers to the Fund do not
properly process and calculate date-related information and data from and after
January 1, 2000. EII and Countrywide are taking steps to address the Year 2000
issue with respect to the computer systems that they use and to obtain
reasonable assurances that comparable steps are being taken by the Fund's other
major service providers. There can be no assurance, however, that these steps
will be sufficient to avoid adverse impact on the Fund from this problem.
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6
<PAGE>
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SIZE LIMITATIONS
If the Fund's assets total $350 million or more on December 31 of any year, then
the Fund will, beginning on March 1 of the next year, cease selling shares to
any new investors. If the Fund's assets total $250 million or less on the last
day of any subsequent calendar quarter, it may resume sales to new investors on
the first day of the next calendar quarter and continue them subject to the $350
million limitation. Shareholders at the time of closure will be able to purchase
new shares after the Fund has closed.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund pays dividends from net investment income quarterly and distributes its
net realized capital gains annually in December. Dividends and distributions
will be automatically reinvested in additional shares of the Fund unless you
choose otherwise.
Each year, you will receive information as to the tax status of distributions
made by the Fund for the calendar year. For federal income tax purposes, all
distributions by the Fund are taxable to you when declared, whether you received
them in cash or reinvested them in shares. Distributions paid from the Fund's
net investment income and short-term capital gains are taxable to you as
ordinary income dividends. A portion of the Fund's dividends may qualify for the
corporate dividends-received deduction, subject to certain limitations.
Distributions paid from long-term capital gains of the Fund are taxable to you
as capital gains, regardless of how long you have held your Fund shares. Capital
gains distributions may be taxable at different rates depending on the length of
time the Fund holds its assets.
The redemption of shares is a taxable event, on which you may realize a capital
gain or a capital loss. The Fund will report to redeeming shareholders the
proceeds of their redemptions. However, because the tax consequences of a
redemption will also depend on the shareholder's basis in the redeemed shares
for tax purposes, shareholders should retain their account statements for use in
determining their tax liability on a redemption.
The discussion of federal income taxes above is for general information only.
The Statement of Additional Information includes an additional description of
federal income tax aspects that may be relevant to you. You may also be subject
to state and local taxes on your investment. You should consult your own tax
adviser concerning the tax consequences of an investment in the Fund.
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NET ASSET VALUE PER SHARE
On each day that the Trust is open for business, the share price (net asset
value) of the shares of the Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange (normally 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 the
Fund's investments that its net asset value might be materially affected. The
Fund's net asset value per share 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. The price at which a
purchase or redemption of Fund shares is effected is based on the next
calculation of net asset value after the order is placed.
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:
(1) 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 for
securities traded on stock exchanges and at the average of their bid and ask
prices for securities quoted by NASDAQ;
(2) 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;
(3) 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
7
<PAGE>
(4) 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 the Fund will fluctuate with the value of the
securities it holds.
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FINANCIAL HIGHLIGHTS
The Fund is the successor to The REvest Growth & Income Fund. The following
financial highlights represent the historical information of The REvest Growth &
Income Fund from August 1, 1994 (commencement of operations) to September 25,
1998 and the historical information of The REvest Value Fund subsequent to
September 25, 1998. The financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Fund's Annual Report to Shareholders and are incorporated by reference into the
Statement of Additional Information and this Prospectus. The Fund's Annual
Report to Shareholders and Statement of Additional Information may be obtained
without charge by calling Investor Information at 1-800-277-5573.
This table is presented to show selected data for a share outstanding throughout
each period, and to assist shareholders in evaluating the Fund's performance.
<TABLE>
<CAPTION>
PERIOD ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.00 $ 12.21 $ 10.73 $ 9.66 $ 10.00
-------- -------- -------- -------- --------
INVESTMENT OPERATIONS:
Net investment income 0.15 0.21 0.21 0.18 0.04
Net realized and unrealized gain (loss)
on investments (1.02) 2.64 2.16 1.38 (0.33)
-------- -------- -------- -------- --------
Total from investment operations (0.87) 2.85 2.37 1.56 (0.29)
-------- -------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS:
Net investment income (0.15) (0.19) (0.21) (0.17) (0.05)
Net realized gain on investments (1.10) (1.87) (0.68) (0.32) --
-------- -------- -------- -------- --------
Total dividends and distributions (1.25) (2.06) (0.89) (0.49) (0.05)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.88 $ 13.00 $ 12.21 $ 10.73 $ 9.66
-------- -------- -------- -------- --------
TOTAL RETURN (6.12%) 23.5% 22.3% 16.2% (2.9%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in thousands) $ 24,730 $ 38,886 $ 42,099 $ 35,804 $ 21,676
Ratio of Net Expenses to Average Net Assets (b) 1.30% 1.26% 1.29% 1.30% 1.42%*
Ratio of Net Investment Income
to Average Net Assets 1.20% 1.60% 1.78% 1.73% 1.45%*
Portfolio Turnover Rate 35% 54% 64% 53% 5%
- -------------------
</TABLE>
*Annualized.
(a) Represents the period from the commencement of operations (August 1, 1994)
through December 31, 1994.
(b) The ratio of expenses to average net assets before waiver of fees by the
investment adviser would have been 1.37% and 1.78%* for the periods ended
December 31, 1998 and 1994, respectively.
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8
<PAGE>
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SHAREHOLDER GUIDE
OPENING AN ACCOUNT AND PURCHASING SHARES
The Fund's shares are offered on a no-load basis. To open a new account, other
than an IRA or 403(b)(7) account, by mail, by wire or through broker-dealers,
simply complete and return the Account Application Form. Separate forms must be
used for opening IRA's or 403(b)(7) accounts; please call Investor Information
at 1-800-277-5573 if you need these forms. Please indicate the amount you wish
to invest. Your initial purchase must be at least $2,000 except for IRA's and
accounts establishing an Automatic Investment Plan, which have $500 minimums.
The Fund may, in the Adviser's sole discretion, accept certain accounts with
less than the stated minimum initial investment. If you need assistance with the
Account Application Form or have any questions about the Fund, please call
Investor Information at 1-800-277-5573.
Subsequent investments may be made by mail, wire, or Automatic Investment (a
system of electronic funds transfer from your bank account), or Direct Deposit.
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PURCHASING BY MAIL:
Complete and sign the enclosed Account Application Form.
NEW ACCOUNT
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Please include the amount of your initial investment on the Account Application
Form, make your check payable to "The REvest Value Fund", and mail to:
The REvest Value Fund
P.O. Box 5354
Cincinnati, OH 45201-5354
For express or registered mail, send to:
The REvest Value Fund
312 Walnut Street
21st Floor
Cincinnati, OH 45202
ADDITIONAL INVESTMENTS TO EXISTING ACCOUNTS
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Additional investments should include the Invest-by-Mail remittance form
attached to your Fund confirmation statements. Please make your check payable to
"The REvest Value Fund", write your account number on your check and, using the
return envelope provided, mail to the address indicated on the Invest-by-Mail
form.
All written requests should be mailed to one of the addresses indicated for new
accounts.
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PURCHASING BY WIRE:
Before wiring: Please contact Shareholder Services at 1-877-4REVEST for wiring
instructions. To ensure proper receipt, please be sure your bank includes the
name of the Fund and your order number or account number. If you are opening a
new account, you must call Shareholder Services, complete the Account
Application Form and mail it to the "New Account" address above after completing
your wire arrangement. Note: Federal Funds wire purchase orders will be accepted
only when the Fund and Custodian are open for business.
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PURCHASING BY AUTOMATIC INVESTMENT:
The Automatic Investment Plan allows you to make regular, automatic transfers
($50 minimum) from your bank account to purchase shares in your Fund account on
the 15th or last day of the month. To establish the Automatic Investment Plan,
please provide the appropriate information on the Account Application Form and
ATTACH A VOIDED CHECK.
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PURCHASING BY DIRECT DEPOSIT:
The Payroll Direct Deposit Plan and Government Direct Deposit Plan let you have
investments ($50 minimum) made from your net payroll or government check into
your existing Fund account each pay period. Your employer must have direct
deposit capabilities through ACH (Automated Clearing House) available to its
employees. You may terminate participation in these programs by giving written
notice to your employer or government agency, as appropriate. The Fund is not
responsible for the efficiency of the employer or government agency making the
payment or any financial institution transmitting payments.
To initiate a Direct Deposit Plan, you must complete an Authorization for Direct
Deposit form, which may be obtained from Investor Information by calling
1-800-277-5573.
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CHOOSING A DISTRIBUTION OPTION
You may select one of three distribution options:
1. Automatic Reinvestment Option: Both net investment income dividends and
capital gains distributions will be reinvested in additional Fund shares.
This option will be selected for you automatically unless you specify one
of the other options.
2. Cash Dividend Option: Dividends from net investment income and short-term
capital gains will be paid in cash and long-term capital gains
distributions will be reinvested in additional Fund shares.
3. All Cash Option: Both dividends and capital gains distributions will be
paid in cash.
If you select the Cash Dividend Option or the All Cash Option and the U.S.
Postal Service cannot deliver your checks or if your checks remain uncashed for
six months, your dividends may be reinvested in your account at the then-current
net asset value and your account will be converted to the Automatic Reinvestment
Option. No interest will accrue on amounts represented by uncashed distribution
checks.
You may change your distribution option by calling Shareholder Services at
1-877-4REVEST.
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IMPORTANT ACCOUNT INFORMATION
The easiest way to establish optional services on your account is to select the
options you desire when you complete your Account Application Form. If you want
to add shareholder options later, you may need to provide additional information
and a signature guarantee. Please call Shareholder Services at 1-877-4REVEST for
further assistance.
The Fund's account application contains provisions in favor of the Fund, EII,
Countrywide 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 redemptions) made available to investors.
Signature Guarantees
For our mutual protection, we may require a signature guarantee on certain
written transaction requests. A signature guarantee verifies the authenticity of
your signature and may be obtained from banks, brokerage firms and any other
guarantor that our transfer agent deems acceptable. A signature guarantee cannot
be provided by a notary public.
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Broker/Dealer Purchases
If you purchase Fund shares through a registered broker-dealer or investment
adviser, the broker-dealer or adviser may charge a service fee.
Nonpayment
If your check or wire does not clear, the transaction will be canceled and you
will be responsible for any losses or fees the Fund or its transfer agent
incurs. If you are already a shareholder, the Fund can redeem shares from any
identically registered account in the Fund as reimbursement for any loss
incurred.
Trade Date for Purchases
Your trade date is the date on which share purchases are credited to your
account. If your purchase is made by check or Federal Funds wire and is received
prior to the close of regular trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time), your trade date is the date of receipt. If your
purchase is received after the close of regular trading on the Exchange, your
trade date is the next business day. Your shares are purchased at the net asset
value determined on your trade date.
In order to prevent lengthy processing delays caused by the clearing of foreign
checks, the Fund will accept only a foreign check which has been drawn in U.S.
dollars and has been issued by a foreign bank with a United States correspondent
bank.
The Trust reserves the right to suspend the offering of Fund shares to new
investors. The Trust also reserves the right to limit the amount of investments
and to reject any specific purchase request.
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REDEEMING YOUR SHARES
You may redeem any portion of your account on each day the Fund is open for
business. You may request a redemption in writing or by telephone. Redemption
proceeds normally will be sent within three business days after the receipt of
the request in Good Order (as defined below).
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REDEEMING BY MAIL
Requests should be mailed to: The REvest Value Fund, P.O. Box 5354, Cincinnati,
OH 45201-5354. (For express or registered mail, send your request to: The REvest
Value Fund, 312 Walnut Street, 21st Floor, Cincinnati, OH 45202). The redemption
price of shares will be their net asset value next determined after the Fund's
transfer agent has received all required documents in Good Order.
Definition of Good Order
Good Order means that the request includes the following:
1. The account number and Fund name.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on the account.
4. Signature guarantees if either the value of the shares being redeemed
exceeds $25,000, if the payment is to be sent to an address other than the
address of record, if the payment is to be made to a payee other than the
shareholder, or if the name(s) or the address on the account has been
changed within 30 days of the redemption request.
5. Other supporting legal documentation that might be required, in the case of
retirement plans, corporations, trusts, estates and certain other accounts.
If you have any questions about what is required as it pertains to your request,
please call Shareholder Services at 1-877-4REVEST.
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REDEEMING BY TELEPHONE
If you have not established Automatic Withdrawal, you may redeem up to $15,000
of your Fund shares by telephone, provided the proceeds are mailed to your
address of record. Unless you have specifically notified the Fund's transfer
agent not to honor redemption requests by telephone, the telephone redemption
privilege is automatically available to your account. To redeem shares by
telephone, you or your pre-authorized representative may call Shareholder
Services at 1-877-4REVEST. Redemption requests received by telephone prior to
the close of regular trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time) are processed on the day of receipt; redemption requests received
by telephone after the close of regular trading on the Exchange are processed on
the business day following receipt. Telephone redemption service is not
available for Trust-sponsored retirement plan accounts. Telephone redemptions
will not be permitted for a period of thirty days after a change in the name(s)
on the account or the address of record.
Neither the Fund, its transfer agent nor their respective affiliates, will be
liable for following instructions communicated by telephone that are reasonably
believed to be genuine or for any loss, damage, cost or expenses incurred in
acting on such instructions. The transfer agent uses certain procedures to
confirm that telephone instructions are genuine, which may include requiring
some form of personal identification prior to acting on the instructions,
providing written confirmation of the transaction and/or recording incoming
calls. If it does not follow such procedures, the Fund or the transfer agent may
be liable for any losses due to unauthorized or fraudulent instructions.
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REDEEMING BY AUTOMATIC WITHDRAWAL
If you select the Automatic Withdrawal option, shares will be automatically
redeemed from your Fund account and the proceeds transferred to your bank
account according to the schedule you have selected. You must have at least
$25,000 in your Fund account to establish the Automatic Withdrawal option.
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REDEEMING BY WIRE
The Wire Redemption option lets you redeem up to $15,000 of shares from your
Fund account by telephone and transfer the proceeds directly to your domestic
bank or brokerage account as designated on your Account Application Form. You
may elect Wire Redemptions on the Account Application Form or call Shareholder
Services at 1-877-4REVEST for further assistance. There may be a charge from the
Fund's transfer agent and/or your bank for this service.
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IMPORTANT REDEMPTION INFORMATION
If you are redeeming shares recently purchased by check or Automatic Investment
Plan, the proceeds of the redemption may not be sent until payment for the
purchase is collected, which may take up to fifteen calendar days. Otherwise,
redemption proceeds must be sent to you within five business days of receipt of
your request in Good Order.
If you experience difficulty in making a telephone redemption during periods of
drastic economic or market changes, your redemption request may be made by
regular or express mail. It will be processed at the net asset value next
determined after the Fund's transfer agent receives your request in Good Order.
The Trust reserves the right to revise or terminate the telephone redemption
privilege at any time.
The Trust may suspend the redemption right or postpone payment at times when the
New York Stock Exchange is closed or under any emergency circumstances as
determined by the Securities and Exchange Commission.
Although redemptions have always been made in cash, the Fund may redeem in kind
under certain circumstances.
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EARLY REDEMPTION FEE
In order to discourage short-term trading, an early redemption fee of 1% of the
net asset value of the shares being redeemed is imposed if you redeem shares of
the Fund less than one year after becoming a shareholder. The fee is payable to
the Fund out of the redemption proceeds otherwise payable to you and is used to
offset the costs associated with redemptions. No redemption fee will be payable
by (1) employees or representatives of the Trust or EII or members of their
immediate families or employee benefit plans established for their benefit, (2)
participants in the Automatic Withdrawal Plan, (3) certain Trust-approved Group
Investment Plans and charitable organizations, or (4) omnibus and other similar
account customers of certain Trust-approved broker-dealers and other
institutions.
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MINIMUM ACCOUNT BALANCE REQUIREMENT
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to involuntarily redeem shares in any Fund account that falls
below the minimum initial investment due to redemptions by the shareholder. If
at any time the balance in an account does not have a value at least equal to
the minimum initial investment or if an Automatic Investment Plan is
discontinued before an account reaches the minimum initial investment that would
otherwise be required, you may be notified that the value of your account is
below the Fund's minimum account balance requirement. You would then have sixty
days to increase your account balance before the account is liquidated. Proceeds
would be promptly paid to the shareholder.
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TRANSFERRING OWNERSHIP
You may transfer the ownership of any of your Fund shares to another person by
writing to: Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, OH
45201-5354. The request must be in Good Order (see "Redeeming Your Shares -
Definition of Good Order"). Before mailing your request, please contact
Shareholder Services (1-877-4REVEST) for full instructions.
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OTHER SERVICES
For more information about any of these services, please call Investor
Information at 1-800-277-5573.
Statements and Reports
A statement will be sent to you quarterly and each time you have a transaction
in your account. Financial reports will be mailed semi-annually. To reduce
expenses, only one copy of most shareholder reports may be mailed to a
household. Please call Investor Information if you need additional copies.
Tax-Sheltered Retirement Plans
Shares of the Fund are available for purchase in connection with certain types
of tax-sheltered retirement plans, including Individual Retirement Accounts
(IRA's) for individuals and 403(b)(7) Plans for employees of certain tax-exempt
organizations.
These plans should be established with the Trust only after an investor has
consulted with a tax adviser or attorney. Information about the plans and the
appropriate forms may be obtained from Investor Information at 1-800-277-5573.
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THE WINTER HARBOR FUND
511 Congress Street
Portland, Maine 04101
INVESTMENT ADVISER:
Ebright Investments, Inc.
Jennifer E. Goff, President
511 Congress Street
Portland, Maine 04101
INVESTMENT SUB-ADVISER:
Gouws Capital Management, Inc.
511 Congress Street
Portland, Maine 04101
DISTRIBUTOR:
CW Fund Distributors, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AGENT:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
CUSTODIAN:
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
OFFICERS OF THE TRUST:
Jennifer E. Goff, President
Robert G. Dorsey, Vice President
Mark J. Seger, Treasurer
John F. Splain, Secretary
Additional information about the Fund is included in the Statement of Additional
Information ("SAI"), which is incorporated by reference in its entirety.
Additional information about the Fund's investments is available in the Fund's
annual and semiannual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and strategies that
significantly affected the Fund's performance during its last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make inquiries about the Fund, please call
1-800-277-5573.
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1-800-SEC-0330. Reports and other information about
the Fund are available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, D.C. 20549-6009.
File No. 811-8793
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THE REvest VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
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The REvest Value Fund (the "Fund") is a professionally-managed series of
The Winter Harbor Fund (the "Trust"), a Delaware business trust and an open-end
registered investment company.
The Fund is designed for long-term investors, including those who wish to
use its shares as a funding vehicle for certain tax-deferred retirement plans
(including Individual Retirement Account ("IRA") plans), and not for investors
who intend to liquidate their investments after a short period of time.
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Trust's current Prospectus for the Fund (dated May
1, 1999). Please retain this document for future reference. The audited
financial statements included in the Annual Report to Shareholders of the Fund
for the fiscal year ended December 31, 1998 are incorporated herein by
reference. To obtain a copy of the Fund's Prospectus or Annual Report please
call Investor Information at 1-800-277-5573.
Investment Adviser Transfer Agent
- ------------------ --------------
Ebright Investments, Inc. ("EII") Countrywide Fund Services, Inc.
Distributor Custodian
- ----------- ---------
CW Fund Distributors, Inc. Firstar Bank, N.A.
TABLE OF CONTENTS
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PAGE
INVESTMENT POLICIES AND LIMITATIONS 2
RISK FACTORS AND SPECIAL CONSIDERATIONS 3
MANAGEMENT OF THE TRUST 6
PRINCIPAL HOLDERS OF SHARES 8
INVESTMENT ADVISORY SERVICES 9
DISTRIBUTOR 11
COUNTRYWIDE FUND SERVICES, INC. 11
CUSTODIAN 12
INDEPENDENT ACCOUNTANTS 12
PORTFOLIO TRANSACTIONS 12
PRICING OF SHARES BEING OFFERED 13
REDEMPTIONS IN KIND 13
TAXATION 13
DESCRIPTION OF THE TRUST 14
HISTORICAL PERFORMANCE INFORMATION 15
ANNUAL REPORT 16
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
- -----------------------------------
The following investment policies and limitations supplement those set
forth in the Fund's Prospectus. Unless otherwise noted, whenever an investment
policy or limitation states a maximum percentage of the Fund's assets that may
be invested in any security or other asset or sets forth a policy regarding
quality standards, the percentage limitation or standard will be determined
immediately after giving effect to the Fund's acquisition of the security or
other asset. Accordingly, any subsequent change in values, net assets or other
circumstances will not be considered in determining whether the investment
complies with the Fund's investment policies and limitations.
The Fund's investment objectives, as stated in the Prospectus, and its
fundamental investment policies cannot be changed without the approval of a
"majority of the outstanding voting securities" of the Fund, as defined in the
Investment Company Act of 1940 (the "1940 Act"). Except for the fundamental
investment restrictions set forth below, the investment policies and limitations
described in this Statement of Additional Information are operating policies and
may be changed by the Board of Trustees without shareholder approval. However,
shareholders will be notified prior to a material change in an operating policy
affecting the Fund.
The Fund may not, as a matter of fundamental policy:
1. Issue any senior securities;
2. Purchase securities on margin or write call options on its portfolio
securities;
3. Sell securities short;
4. Borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes in an amount not exceeding 5% of
its total assets;
5. Underwrite the securities of other issuers;
6. Invest more than 5% of its total assets in the securities of foreign
issuers;
7. Invest in restricted securities or in repurchase agreements which
mature in more than seven days;
8. Invest more than 10% of its net assets in securities without readily
available market quotations (i.e., illiquid securities);
9. Invest, with respect to 75% of its total assets, more than 5% of its
assets in the securities of any one issuer (except U.S. Government
securities);
10. Invest more than 25% of its assets in any one industry;
11. Acquire more than 10% of the outstanding voting securities of any one
issuer;
12. Purchase or sell real estate or real estate mortgage loans or invest
in the securities of real estate companies unless such securities are
publicly-traded;
13. Purchase or sell commodities or commodity contracts;
14. Make loans, except for purchases of portions of issues of
publicly-distributed bonds, debentures and other securities, whether
or not such purchases are made upon the original issuance of such
securities, and except that the Fund may loan up to 5% of its assets
to qualified brokers, dealers or institutions for their use relating
to short sales or other securities transactions (provided that such
loans are fully collateralized at all times);
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15. Invest in companies for the purpose of exercising control of
management;
16. Purchase portfolio securities from or sell such securities directly to
any of the Trust's Trustees, officers, employees or investment
adviser, as principal for their own accounts;
17. Invest in the securities of other investment companies; or
18. Purchase any warrants, rights or options, except that the Fund may, if
no value is assigned thereto, acquire warrants in units with or
attached to debt securities or non-convertible preferred stock.
The Fund may not, as a matter of operating policy:
1. Invest more than 5% of its net assets in lower-rated (high-risk)
non-convertible debt securities; or
2. Enter into repurchase agreements with any counterparty other than the
custodian of the Fund's assets or having a term of more than seven
days.
RISK FACTORS AND SPECIAL CONSIDERATIONS
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Fund's Rights as Stockholder
As noted above, the Fund may not invest in a company for the purpose of
exercising control of management. However, the Fund may exercise its rights as a
stockholder and communicate its views on important matters of policy to
management, the board of directors and/or stockholders if EII or the Board
determine that such matters could have a significant effect on the value of the
Fund's investment in the company. The activities that the Fund may engage in,
either individually or in conjunction with others, may include, among others,
supporting or opposing proposed changes in a company's corporate structure or
business activities; seeking changes in a company's board of directors or
management; seeking changes in a company's direction or policies; seeking the
sale or reorganization of a company or a portion of its assets; or supporting or
opposing third party takeover attempts. This area of corporate activity is
increasingly prone to litigation, and it is possible that the Fund could be
involved in lawsuits related to such activities. EII will monitor such
activities with a view to mitigating, to the extent possible, the risk of
litigation against the Fund and the risk of actual liability if the Fund is
involved in litigation. However, no guarantee can be made that litigation
against the Fund will not be undertaken or liabilities incurred.
The Fund may, at its expense or in conjunction with others, pursue
litigation or otherwise exercise its rights as a stockholder to seek to protect
the interests of stockholders if EII and the Trust's Board determine this to be
in the best interests of the Fund's shareholders.
Securities Lending
The Fund may lend up to 5% of its assets to brokers, dealers and other
financial institutions. Securities lending allows the Fund to retain ownership
of the securities loaned and, at the same time, to earn additional income. Since
there may be delays in the recovery of loaned securities or even a loss of
rights in collateral supplied should the borrower fail financially, such loans
will be made only if, in EII's judgment, the consideration to be earned from
such loans justifies the risk.
EII understands that it is the current view of the staff of the Securities
and Exchange Commission that the Fund may engage in such loan transactions only
under the following conditions: (1) the Fund must receive 100% collateral in the
form of cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the market
value of the securities loaned (determined on a daily basis) rises above the
value of the collateral; (3) after giving notice, the Fund must be able to
terminate the loan at any time; (4) the Fund must receive reasonable interest on
the loan or a flat fee from the borrower, as well
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<PAGE>
as amounts equivalent to any dividends, interest or other distributions on the
securities loaned and to any increase in market value; (5) the Fund may pay only
reasonable custodian fees in connection with the loan; and (6) the Fund must be
able to vote proxies on the securities loaned, either by terminating the loan or
by entering into an alternative arrangement with the borrower.
Borrowing
The Fund may borrow from banks or as may be necessary for the clearance of
securities transactions but only for emergency or extraordinary purposes in an
amount not exceeding 5% of the Fund's total assets. The Fund's policy on
borrowing is a fundamental policy which may not be changed without the approval
of a majority of its outstanding voting securities.
Lower-Rated (High-Risk) Debt Securities
The Fund may invest up to 5% of its net assets in lower-rated (high-risk)
non-convertible debt securities. They may be rated from Ba to Caa by Moody's
Investors Service, Inc. or from BB to CCC by Standard & Poor's Corporation or
may be unrated. These securities have poor protection with respect to the
payment of interest and repayment of principal and may be in default as to the
payment of principal or interest. These securities are often considered to be
speculative and involve greater risk of loss or price changes due to changes in
the issuer's capacity to pay. The market prices of lower-rated (high-risk) debt
securities may fluctuate more than those of higher-rated debt securities and may
decline significantly in periods of general economic difficulty, which may
follow periods of rising interest rates.
While the market for lower-rated (high-risk) corporate debt securities has
been in existence for many years and has weathered previous economic downturns,
the 1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience may
not provide an accurate indication of the future performance of the
high-yield/high-risk bond market, especially during periods of economic
recession. In fact, from 1989 to 1991, the percentage of lower-rated (high-risk)
debt securities that defaulted rose significantly above prior levels.
The market for lower-rated (high-risk) debt securities may be thinner and
less active than that for higher-rated debt securities, which can adversely
affect the prices at which the former are sold. If market quotations cease to be
readily available for a lower-rated (high-risk) debt security in which the Fund
has invested, the security will then be valued in accordance with procedures
established by the Board of Trustees of the Trust. Judgment plays a greater role
in valuing lower-rated (high-risk) debt securities than is the case for
securities for which more external sources for quotations and last sale
information are available. Adverse publicity and changing investor perceptions
may affect the Fund's ability to dispose of lower-rated (high-risk) debt
securities.
Since the risk of default is higher for lower-rated (high-risk) debt
securities, EII's research and credit analysis may play an important part in
managing securities of this type for the Fund. In considering such investments
for the Fund, EII will attempt to identify those issuers of lower-rated
(high-risk) debt securities whose financial condition is adequate to meet future
obligations, has improved or is expected to improve in the future. EII's
analysis may focus on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects and the experience and
managerial strength of the issuer.
Foreign Investments
The Fund may invest up to 5% of its total assets in the securities of
foreign issuers. Foreign investments can involve significant risks in addition
to the risks inherent in U.S. investments. The value of securities denominated
in or indexed to foreign currencies and of dividends and interest from such
securities can change significantly when foreign currencies strengthen or weaken
relative to the U.S. dollar. Foreign securities markets generally have less
trading volume and less liquidity than U.S. markets, and prices on some foreign
markets can be highly volatile. Many foreign countries lack uniform accounting
and disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an issuer's
4
<PAGE>
financial condition and operations. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions and custodial costs, are
generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest or adverse diplomatic
developments. There is no assurance that EII will be able to anticipate these
potential events or counter their effects.
The considerations noted above are generally intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries and securities markets
that trade a small number of securities.
American Depositary Receipts ("ADRs") are certificates held in trust by a
bank or similar financial institution evidencing ownership of shares of a
foreign-based issuer. Designed for use in U.S. securities markets, ADRs are
alternatives to the purchase of the underlying foreign securities in their
national markets and currencies.
ADR facilities may be established as either unsponsored or sponsored. While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depository requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depository usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions and the performance
of other services. The depository of an unsponsored facility frequently is under
no obligation to distribute shareholder communications received from the issuer
of the deposited securities or to pass through voting rights to ADR holders in
respect of the deposited securities. Sponsored ADR facilities are created in
generally the same manner as unsponsored facilities, except that the issuer of
the deposited securities enters into a deposit agreement with the depository.
The deposit agreement sets out the rights and responsibilities of the issuer,
the depository and the ADR holders. With sponsored facilities, the issuer of the
deposited securities generally will bear some of the costs relating to the
facility (such as deposit and withdrawal fees). Under the terms of most
sponsored arrangements, depositories agree to distribute notices of shareholder
meetings and voting instructions and to provide shareholder communications and
other information to the ADR holders at the request of the issuer of the
deposited securities.
Repurchase Agreements
In a repurchase agreement, the Fund in effect makes a loan by purchasing a
security and simultaneously committing to resell that security to the seller at
an agreed upon price on an agreed upon date within a number of days (usually not
more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon incremental amount which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value (at least equal to the amount of
the agreed upon resale price and marked to market daily) of the underlying
security.
5
<PAGE>
The Fund may engage in repurchase agreements with respect to any U.S.
Government security. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays and costs to
the Fund in connection with bankruptcy proceedings), it is the policy of the
Trust to enter into repurchase agreements only with its custodian and having a
term of seven days or less.
Portfolio Turnover
The Fund will not trade in securities for short-term profits, but, when
circumstances warrant, securities may be sold without regard to the length of
time held. For the years ended December 31, 1998, 1997 and 1996, the Fund had
portfolio turnover rates of 9%, 54% and 64%, respectively. Higher portfolio
turnover rates would increase the Fund's transaction costs, including brokerage
commissions.
MANAGEMENT OF THE TRUST
- -----------------------
The following table sets forth certain information as to each Trustee and
executive officer of the Trust:
<TABLE>
<CAPTION>
Name, Address and Age Position Held with the Trust Principal Occupations During Past 5 Years
- --------------------- ---------------------------- -----------------------------------------
<S> <C> <C>
Jennifer E. Goff* (27) Trustee and President Ms. Goff has been the President of
511 Congress Street Ebright Investments, Inc., the Trust's
Portland, Maine 04101 investment adviser, since July 1997. She
was its Vice President from August 1994
to 1997. From 1993 to 1994, Ms. Goff was
a Research Analyst at Royce &
Associates, Inc. (formerly Quest
Advisory Corp.) in New York, New York.
Judith D. Freyer (49) Trustee Ms. Freyer has for the last five years
2000 Market Street been the Vice President of Investments
Philadelphia, Pennsylvania 19103 and Treasurer for the Board of Pensions
of the Presbyterian Church (U.S.A.).
Earl L. Mummert (52) Trustee Mr. Mummert has for the last five years
500 Nationwide Drive been a Vice President for Harrisburg,
Pennsylvania 17110 Conrad M. Siegel, Inc. (an actuarial firm).
Vincent T. Phillips (52) Trustee Mr. Phillips has for the last five
179 Belle Forrest Circle years been the President of Phillips
Suite 202 & Company, Inc. (a registered investment
Nashville, Tennessee 37221 adviser).
Robert G. Dorsey (42) Vice President Mr. Dorsey is President and Treasurer of
312 Walnut Street Countrywide Fund Services, Inc. ("CFSI")
21st Floor (a registered transfer agent) and CW
Cincinnati, OH 45202 Fund Distributors, Inc. ("CW") (a
registered broker-dealer) and First Vice
President and Treasurer of Countrywide
Investments, Inc. ("CII") (a registered
broker-dealer and investment adviser)
and Countrywide Financial Services, Inc.
("CF") (a financial services company and
parent of CFSI and CII and a wholly
owned subsidiary of Countrywide
6
<PAGE>
Credit Industries, Inc. ("CCI")). He is
also Vice President of Countrywide
Investment Trust, Countrywide Tax-Free
Trust, Countrywide Strategic Trust,
Brundage Story and Rose Investment
Trust, The Thermo Opportunity Fund,
Inc., Markman MultiFund Trust, Dean
Family of Funds, The New York State
Opportunity Funds, Wells Family of Real
Estate Funds, Boyar Value Fund, Inc.,
Profit Funds Investment Trust,
Atalanta/Sosnoff Investment Trust, UC
Investment Trust, Lake Shore Family of
Funds, The Bjurman Funds, and Maplewood
Investment Trust, a series company, and
Assistant Vice President of Firsthand
Funds, Schwartz Investment Trust, The
Tuscarora Investment Trust, Williamsburg
Investment Trust, The Westport Funds,
Albemarle Investment Trust, The James
Advantage Funds and The Gannett Welsh &
Kotler Funds (all of which are
registered investment companies).
Mark J. Seger (37) Treasurer Mr. Seger is First Vice President of CW
312 Walnut Street and CFSI. He is also Treasurer of
21st Floor Countrywide Investment Trust,
Cincinnati, OH 45202 Countrywide Tax-Free Trust, Countrywide
Strategic Trust, Brundage Story and Rose
Investment Trust, The Bjurman Funds, The
Thermo Opportunity Fund, Inc., Markman
MultiFund Trust, Wells Family of Real
Estate Funds, Profit Funds Investment
Trust, Atalanta/Sosnoff Investment
Trust, UC Investment Trust, Albemarle
Investment Trust, Williamsburg
Investment Trust, Dean Family of Funds,
The New York State Opportunity Funds,
Lake Shore Family of Funds and Maplewood
Investment Trust, a series company, and
Assistant Treasurer of Firsthand Funds,
Boyar Value Fund, Inc., The Tuscarora
Investment Trust, Schwartz Investment
Trust, The Westport Funds, The James
Advantage Funds and The Gannett Welsh &
Kotler Funds.
John F. Splain (42) Secretary Mr. Splain is First Vice President,
312 Walnut Street Secretary and General Counsel of CFSI,
21st Floor CW, CII, and CF. He is also Secretary of
Cincinnati, OH 45202 Countrywide Investment Trust,
Countrywide Tax-Free Trust, Countrywide
Strategic Trust, Brundage Story and Rose
Investment Trust, The Thermo Opportunity
Fund, Inc.,
7
<PAGE>
Markman MultiFund Trust, The Tuscarora
Investment Trust, Wells Family of Real
Estate Funds, Boyar Value Fund, Inc.,
Profit Funds Investment Trust,
Williamsburg Investment Trust, Lake
Shore Family of Funds and Maplewood
Investment Trust, a series company, and
Assistant Secretary of Schwartz
Investment Trust, Dean Family of Funds,
The Westport Funds, Albemarle Investment
Trust, The James Advantage Funds, The
Bjurman Funds, The New York State
Opportunity Funds, Atalanta/Sosnoff
Investment Trust, UC Investment Trust
and The Gannett Welsh & Kotler Funds.
</TABLE>
*An "interested person" of the Trust within the meaning of Section 2(a)(19) of
the 1940 Act.
The Board of Trustees has an Audit Committee, comprised of Judith D. Freyer
and Vincent T. Phillips. The Audit Committee is responsible for recommending the
selection and nomination of independent auditors for the Fund and for conducting
post-audit reviews of its financial condition with such auditors.
The Fund has a Valuation Committee, comprised of Jennifer E. Goff, Judith
D. Freyer, Vincent T. Phillips and Brian J. Manley. The Valuation Committee
assures that securities are valued in accordance with the valuation procedures
of the Fund.
Each Trustee of the Trust (other than Jennifer E. Goff, who is an
interested person of the Trust) is paid $500 for each meeting of the Board of
Trustees attended. Disinterested Trustees are also reimbursed for travel and
related expenses incurred in attending meetings of the Board of Trustees. No
officer of the Trust is compensated by the Trust. The Trust has not adopted any
form of retirement plan covering Trustees or officers.
The following table provides the estimated aggregate compensation paid by the
Trust to each Trustee for the fiscal year ended December 31, 1998.
Pension or
Retirement
Benefits Accrued
as Part of Trust Total Compensation
Expenses from the Trust
----------------------------------------
Jennifer E. Goff 0 0
Trustee
Judith D. Freyer 0 $1,500
Trustee
Earl L. Mummert 0 $1,000
Trustee
Vincent T. Phillips 0 $1,500
Trustee
8
<PAGE>
PRINCIPAL HOLDERS OF SHARES
- ---------------------------
As of February 5, 1999, the following persons were known to the Trust to be the
record or beneficial owners of 5% or more of the outstanding shares of the Fund:
<TABLE>
<CAPTION>
Number Type of Percentage of
Name and Address of Shares Ownership Outstanding Shares
- ---------------- --------- --------- ------------------
<S> <C> <C> <C>
Charles Schwab & Co. Inc. 275,544 Record 12.75%
101 Montgomery Street
San Francisco, CA 94104-4122
Bankers Trust Company Trustee 528,062 Beneficial 24.44%
FBO Carlisle Companies, Inc.
Master Retirement Trust
100 Plaza One, MS 3048
Jersey City, NJ 07311-3902
</TABLE>
As of the same date, the Trustees and officers of the Trust as a group
owned of record or beneficially less than 1% of the outstanding shares of the
Fund.
INVESTMENT ADVISORY SERVICES
- ----------------------------
Investment Adviser
The Trust's business and affairs are managed under the direction of its
Board of Trustees. Ebright Investments, Inc. ("EII"), the Fund's investment
adviser, is responsible for the management of the Fund's portfolio of
investments, subject to the authority of the Board of Trustees. EII, located at
511 Congress Street, Portland, Maine, is an independent investment advisory firm
founded in 1994 and is registered as an investment adviser with the Securities
and Exchange Commission. EII was formerly known as Royce, Ebright & Associates,
Inc. EII was the investment adviser to The REvest Growth & Income Fund, which
commenced operations as a series of The Royce Fund on August 1, 1994. On
September 25, 1998, The REvest Growth & Income Fund ceased to be a series of The
Royce Fund and was reorganized into the Fund as the sole series of the Trust.
This reorganization consisted of the transfer of all of the assets of The REvest
Growth & Income Fund to the Fund in exchange solely for shares of beneficial
interest of the Fund, the assumption of all of the liabilities of The REvest
Growth & Income Fund and the distribution of shares of the Fund to shareholders
of The REvest Growth & Income Fund upon liquidation of The REvest Growth &
Income Fund.
The Fund's portfolio is managed by Jennifer E. Goff, President of EII. She
has been a director and a shareholder of EII since its inception. Jennifer
succeeded her father, Thomas R. Ebright, as President when Mr. Ebright passed
away in 1997. Prior to assuming the office of President, Ms. Goff was Vice
President and Assistant Portfolio Manager. Ms. Goff also worked full-time as a
security analyst at Royce & Associates, Inc. (formerly Quest Advisory Corp.)
from July, 1993 to August, 1994 and then completed her graduate studies in
Finance at Columbia University (M.B.A. 1996). While Ms. Goff is responsible for
EII's investment management activities, EII has entered into a sub-advisory
agreement with Gouws Capital Management, Inc. to share resources in growing and
managing the Fund.
As compensation for its services to the Fund, EII is entitled to receive
advisory fees equal to 1.00% per annum of the first $50 million of the Fund's
average net assets and 0.75% per annum of any additional average net assets over
$50 million. These fees are payable monthly from the assets of the Fund.
Under the Investment Advisory Agreement, EII (1) determines the composition
of the Fund's portfolio, the nature and timing of the changes in it and the
manner of implementing such changes, subject to any directions it may receive
from the Trust's Board of Trustees; (2) provides the Fund with investment
advisory, research and related services; (3) furnishes, without expense to the
Trust, the services of such members of its organization as may be duly elected
executive officers or Trustees of the Trust; and (4) pays all executive
officers' salaries and
9
<PAGE>
expenses and all expenses incurred in performing its investment advisory duties
under the Investment Advisory Agreement.
EII furnishes at its own expense all services, facilities and personnel
necessary to perform its duties under the Investment Advisory Agreement between
the Trust and EII. The Investment Advisory Agreement provides for an initial
term of two years from September 25, 1998, its effective date, and for its
continuance in effect for successive twelve-month periods thereafter, provided
the agreement is specifically approved at least annually by either the vote of a
majority of the disinterested Trustees or by vote of a majority of the
outstanding voting securities of the Fund.
The Investment Advisory Agreement is terminable without penalty on 60 days'
written notice when authorized either by vote of a majority of the outstanding
voting securities of the Fund, by a vote of a majority of the Board or by EII
and will automatically terminate in the event of its assignment. The Investment
Advisory Agreement also provides that EII shall not be liable for any error of
judgment or mistake of law except for willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of its duties and
obligations under the Investment Advisory Agreement and applicable law. The
Investment Advisory Agreement provides that EII may render services to others.
The Trust pays all administrative and other costs and expenses attributable
to its operations and transactions, including, without limitation, transfer
agent and custodian fees; legal, administrative and clerical services; rent for
its office space and facilities; auditing; preparation, printing and
distribution of its prospectuses, proxy statements, shareholders reports and
notices; supplies and postage; Federal and state registration fees; Federal,
state and local taxes; non-affiliated trustees' fees; and brokerage commissions.
For the fiscal year ended December 31, 1998, the Fund accrued advisory fees
of $315,903; however, in order to reduce the operating expenses of the Fund, EII
voluntarily waived $21,200 of its advisory fees. For the fiscal years ended
December 31, 1997 and 1996, EII received advisory fees from the Fund of $447,437
and $375,493 respectively.
Investment Sub-Adviser
EII has retained Gouws Capital Management, Inc. ("GCMI") to provide
investment sub-advisory and marketing support services to the Fund. GCMI,
located at 511 Congress Street, Portland, Maine, is an independent investment
advisory firm founded in 1984 and is registered as an investment adviser with
the Securities and Exchange Commission. GCMI's principal and President, Johann
H. Gouws, is not engaged in any other business or profession other than his
involvement in establishing Acadia Trust, N.A. ("AT"), an affiliated trust
company. GCMI provides investment advisory services to AT, who acts as a
custodian for the majority of GCMI's approximately $800 million in client
assets. GCMI has a value orientation and emphasizes in-depth fundamental
analysis and company visitation similar to EII.
Although EII alone will determine the investments that will be purchased,
retained or sold by the Fund, GCMI will assist EII in such determinations. GCMI
will also, at the direction of EII, be responsible for placing purchase and sell
orders for investments with broker-dealers, and for other related transactions.
GCMI has agreed to provide services in accordance with the Fund's investment
objectives, policies and restrictions.
As compensation for its services to the Fund, GCMI is entitled to receive
sub-advisory fees from EII equal to one-half of EII's net profit (net profit
means the advisory fee paid to EII minus all of EII's expenses, including Ms.
Goff's salary and benefits, and the preferential distribution described below).
GCMI is also entitled to a preferential distribution equal to Ms. Goff's salary
and benefits. Concurrent with the reorganization of the Fund and as compensation
for their part in AT's paying half the expenses incurred in the reorganization,
two of the principals of AT, Johann H. Gouws and Richard E. Curran, Jr.,
received an aggregate of forty-eight percent (48%) of the outstanding voting
common stock of EII. Ms. Goff and her sister, Ellen E. Carlton, own the
remaining fifty-two percent (52%) of the outstanding voting common stock of EII.
For the fiscal year ended December 31, 1998, EII paid GCMI fees of $22,618.
10
<PAGE>
GCMI furnishes at its own expense all services, facilities and personnel
necessary to perform its duties under the Sub-Advisory Agreement between EII and
GCMI. The Sub-Advisory Agreement provides for an initial term of two years from
September 25, 1998, its effective date, and for its continuance in effect for
successive twelve-month periods thereafter, provided the agreement is
specifically approved at least annually by either the vote of a majority of the
disinterested Trustees or by vote of a majority of the outstanding voting
securities of the Fund.
The Sub-Advisory Agreement is terminable without penalty on 60 days'
written notice when authorized either by vote of a majority of the outstanding
voting securities of the Fund or by a vote of a majority of the Board, or by EII
on not less than 120 days' written notice, and will automatically terminate in
the event of its assignment or upon termination of the Investment Advisory
Agreement. The Sub-Advisory Agreement also provides that GCMI shall not be
liable for any error of judgment or mistake of law except for willful
misfeasance, bad faith or gross negligence in the performance of its duties and
obligations under the Sub-Advisory Agreement and applicable law. The
Sub-Advisory Agreement provides that GCMI may render services to others.
DISTRIBUTOR
- -----------
CW Fund Distributors, Inc. (the "Distributor") located at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202, is the Fund's principal underwriter
and, as such, is the exclusive agent for distribution of shares of the Fund. The
Distributor is obligated to sell the shares on a best efforts basis only against
purchase orders for the shares. Shares of the Fund are offered to the public on
a continuous basis.
EII may pay, to unaffiliated broker-dealers, financial institutions or
other service providers who introduce investors to the Fund and/or provide
certain administrative services to those of their customers who are Fund
shareholders, up to .25% of the assets invested in the Fund by their customers.
Compensation paid in connection with such programs may include payments from the
Fund for certain shareholder-related services being provided to the Fund. When
shares of the Fund are purchased in this way, the service provider, rather than
its customer, may be the shareholder of record of the Fund's shares. Investors
should read the program materials provided by the service provider, including
information regarding fees which may be charged. Certain shareholder servicing
features of the Fund may not be available or may be modified in connection with
the program of services offered.
COUNTRYWIDE FUND SERVICES, INC.
- -------------------------------
The Trust's transfer agent, Countrywide Fund Services, Inc.
("Countrywide"), maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. Countrywide is an
affiliate of the Distributor by reason of common ownership. Countrywide receives
for its services as transfer agent a fee payable by the Fund monthly at an
annual rate of $20 per account; provided, however, that the minimum fee is
$1,250 per month. In addition, the Fund pays out-of-pocket expenses, including
but not limited to, postage, envelopes, checks, drafts, forms, reports, record
storage and communication lines.
Countrywide also provides accounting and pricing services to the Fund. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable Countrywide to perform its duties, the Fund
pays Countrywide a fee in accordance with the following schedule:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
$ 0 - $ 50,000,000 $2,000
50 - 100,000,000 2,500
100 - 200,000,000 3,000
Over 200,000,000 4,000 + .001% of
average monthly net assets
over $200,000,000
In addition, the Fund pays all costs of external pricing services.
11
<PAGE>
In addition, Countrywide is retained to provide administrative services to
the Fund. In this capacity, Countrywide supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services. Countrywide supervises the preparation of
tax returns, reports to shareholders of the Fund, 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, the Fund pays Countrywide a fee at the annual rate of
.09% of the average value of its daily net assets up to $100,000,000, .075% of
such assets from $100,000,000 to $200,000,000 and .05% of such assets in excess
of $100,000,000; provided, however, that the minimum fee is $2,000 per month.
CUSTODIAN
- ---------
Firstar Bank, N.A. ("Firstar Bank") is the custodian for the securities,
cash and other assets of the Fund. The Trust has authorized Firstar Bank to
deposit certain domestic and foreign portfolio securities in several central
depository systems and to use foreign sub-custodians for certain foreign
portfolio securities, as allowed by Federal law. Firstar Bank's main office is
at 425 Walnut Street, Cincinnati, Ohio 45202.
INDEPENDENT ACCOUNTANTS
- -----------------------
The firm of PricewaterhouseCoopers LLP, whose address is 100 East Broad
Street, Ste. 2100, Columbus, Ohio 43215-3671, have been selected as the
independent accountants for the Trust.
PORTFOLIO TRANSACTIONS
- ----------------------
EII is responsible for selecting the brokers who, as agents for the Fund,
effect the purchases and sales of the Fund's portfolio securities. No broker is
selected to effect a securities transaction for the Fund unless such broker is
believed by EII to be capable of obtaining the best price and execution for the
security involved in the transaction. In addition to considering a broker's
execution capability, EII generally considers the brokerage and research
services which the broker has provided to it, including any research relating to
the security involved in the transaction and/or to other securities. Such
services may include general economic research, market and statistical
information, industry and technical research, strategy and company research, and
may be written or oral. EII determines the overall reasonableness of brokerage
commissions paid, after considering the amount another broker might have charged
for effecting the transaction and the value placed by EII upon the brokerage
and/or research services provided by such broker.
GCMI, under the direction of EII, may place purchase and sale orders for
the Fund's portfolio securities with broker-dealers that have been pre-approved
by EII. EII is not obligated to reimburse GCMI for any additional out-of-pocket
costs and expenses incurred by GCMI in rendering this service. Even though
investment decisions for the Fund are made by EII independently from those made
by GCMI for GCMI's managed accounts, securities of the same issuer may be
purchased, held or sold by more than one of such accounts. When the Fund and one
or more of GCMI's managed accounts are simultaneously engaged in the purchase or
sale of the same security, GCMI will seek to average the transactions as to
price and allocate them as to amount in a manner believed to be equitable to
each. In some cases, these procedures may adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund.
EII and GCMI are authorized, under Section 28(e) of the Securities Exchange
Act of 1934 and under their respective advisory agreements for the Fund, to pay
a brokerage commission in excess of that which another broker might have charged
for effecting the same transaction, in recognition of the value of brokerage and
research services provided by the broker.
EII and GCMI may also direct that the Fund's brokerage business be placed
with firms which promote the sale of the Fund's shares, consistent with
achieving the best price and execution. In no event will the Fund's brokerage
business be placed with the Distributor.
For the fiscal years ended December 31, 1998, 1997 and 1996, the Fund paid
brokerage commissions of $46,730, $95,045, and $87,201 respectively.
12
<PAGE>
PRICING OF SHARES BEING OFFERED
- -------------------------------
The share price (net asset value) of the shares of each fund is determined
as of the close of the regular session of trading on the New York Stock Exchange
(normally 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 and
Christmas. The Trust may also be open for business on other days in which there
is sufficient trading in either 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, see "Net Asset Value Per Share" in the Prospectus.
REDEMPTIONS IN KIND
- -------------------
It is possible that conditions may arise in the future which would, in the
judgment of the Board of Trustees or management, make it undesirable for the
Fund to pay for all redemptions in cash. In such cases, payment may be made in
portfolio securities or other property of the Fund. However, the Trust has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Trust's net
assets if that is less) in any 90-day period. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share for purposes of such redemption. Shareholders
receiving such securities would incur brokerage costs when these securities are
sold.
TAXATION
- --------
The Prospectus describes generally the tax treatment of distributions by
the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund has qualified and intends to qualify annually 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 the 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 50% 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).
The 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 carryforwards. 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 the Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Fund intends 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.
13
<PAGE>
DESCRIPTION OF THE TRUST
- ------------------------
Trust Organization
The Trust, an open-end, diversified management investment company, was
organized on June 25, 1997 as a Delaware business trust. The Fund is a successor
by reorganization to The REvest Growth & Income Fund, which was a series of The
Royce Fund, a Delaware business trust. The reorganization was effected on
September 25, 1998 under an Agreement and Plan of Reorganization pursuant to
which the assets and liabilities of The REvest Growth & Income Fund were
transferred into the Trust, with the Fund becoming the sole series of the Trust
and Ebright Investments, Inc. (formerly Royce, Ebright & Associates, Inc.)
continuing as investment adviser. A copy of the Trust's Certificate of Trust is
on file with the Secretary of State of Delaware, and a copy of the Trust
Instrument, its principal governing document, is available for inspection by
shareholders at the Trust's offices at 511 Congress Street, Portland, Maine
04101.
Shares of the Fund have equal voting rights and liquidation rights. 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 Fund is not required to hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of shareholders for
the purpose of voting upon removal of any Trustee when requested to do so in
writing by shareholders holding 10% or more of the Fund's outstanding shares.
The Fund will comply with the provisions of Section 16(c) of the 1940 Act in
order to facilitate communications among shareholders.
Each share of the Fund represents an equal proportionate interest in the
assets and liabilities belonging to the Fund with each other share of the 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 the Fund into a
greater or lesser number of shares of the Fund so long as the proportionate
beneficial interest in the assets belonging to the Fund are in no way affected.
In case of any liquidation of the Fund, the holders of shares of the Fund will
be entitled to receive as a class a distribution out of the assets, net of the
liabilities, belonging to the Fund. No shareholder is liable to further calls or
to assessment by the Fund without his express consent.
Shareholder Liability
Generally, shareholders will not be personally liable for the obligations
of the Fund or of the Trust under Delaware law. The Delaware Business Trust Act
provides that a shareholder of a Delaware business trust is entitled to the same
limited liability extended to shareholders of private corporations for profit
organized under the Delaware General Corporation Law. No similar statutory or
other authority limiting business trust shareholder liability exists in many
other states. As a result, to the extent that the Trust or a shareholder of the
Trust is subject to the jurisdiction of courts in those states, the courts may
not apply Delaware law and may thereby subject Trust shareholders to liability.
To guard against this possibility, the Trust Instrument (1) requires that every
written obligation of the Trust contain a statement that such obligation may be
enforced only against the Trust's assets (however, the omission of this
disclaimer will not operate to create personal liability for any shareholder);
and (2) provides for indemnification out of Trust property of any Trust
shareholder held personally liable for the Trust's obligations. Thus, the risk
of a Trust shareholder incurring financial loss beyond his investment because of
shareholder liability is limited to circumstances in which: (1) a court refuses
to apply Delaware law; (2) no contractual limitation of liability was in effect;
and (3) the Trust itself would be unable to meet its obligations. In light of
Delaware law, the nature of the Trust's business and the nature of its assets,
management believes that the risk of personal liability to a Trust shareholder
is extremely remote.
14
<PAGE>
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, the 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:
n
P (1 + T) = 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 will include performance of the Fund's
predecessor, The REvest Growth & Income Fund, a series of The Royce Fund, prior
to August 1, 1994. The average annual total returns of the Fund for the periods
ended December 31, 1998 are as follows:
1 Year -6.1%
Since Inception (August 1, 1994) 11.2%
The 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. The Fund may also show, for
comparative purposes and as information to Fund shareholders who previously were
shareholders in The REvest Growth & Income Fund, the return data for the in The
REvest Growth & Income Fund, and may combine such data for the year of
reorganization. If so, such depiction will be clearly noted in text accompanying
such depiction. The Fund's total returns as calculated in this manner for each
year since inception are as follows:
August 1 - December 31, 1994 -2.9%
Year Ended December 31, 1995 16.2%
Year Ended December 31, 1996 22.3%
Year Ended December 31, 1997 23.5%
Year Ended December 31, 1998 -6.1%
A nonstandardized quotation may also indicate average annual rates of return
over periods other than those specified for average annual total return. For
example, the Fund's average annual compounded rate of return for the three years
ended December 31, 1998 was 12.3%. A nonstandardized quotation of total return
will always be accompanied by the Fund's average annual total return as
described above.
The performance quotations described above are based on historical earnings
and are not intended to indicate future performance.
From time to time the Fund may advertise its 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 Fund may also compare
its 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, the Standard & Poor's 500
Stock Index, the Russell 2000 Index, the NASDAQ Composite Index and the Value
Line Composite Index. In connection with a ranking, the Fund may provide
additional information, such as the particular category of funds to which the
ranking relates,
15
<PAGE>
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
Fund may also present its 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.
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 Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.
Advertising for the Fund may contain examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more shares
when prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share can be
lower than if fixed numbers of shares are purchased at the same intervals. In
evaluating such a plan, investors should consider their ability to continue
purchasing shares during periods of low price levels.
ANNUAL REPORT
- -------------
The audited financial statements required to be included herein are
incorporated by reference to the Annual Report to Shareholders of the Fund for
the fiscal year ended December 31, 1998
16
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant, dated June 25, 1997, as amended
July 10, 1997*
(b) None
(c) Sections 2.02, 2.04 and 2.06 of Registrant's Trust Instrument
provide as follows:
"SECTION 2.02 ISSUANCE OF SHARES. Subject to applicable law, the
Trustees in their discretion may, from time to time, without vote
of the Shareholders, issue Shares, in addition to the then issued
and Outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration,
including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such
manner acquire other assets (including the acquisition of assets
subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held
in the treasury. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the
Trust. Contributions to the Trust may be accepted for, and Shares
shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by
the Trustees, Shares shall be transferable on the records of the
Trust only by the record holder thereof or by that holder's agent
thereunto duly authorized in writing, upon delivery to the
Trustees or the Transfer Agent of a duly executed instrument of
transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by
the Trustees or Transfer Agent. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record
is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the
Trustees nor the Trust, nor any Transfer Agent or registrar nor
any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. The Trust created
hereby shall consist of one or more Series and separate and
distinct records shall be maintained by the Trust for each Series
and the assets associated with any such Series shall be held and
accounted for separately from the assets of the Trust or any
other Series. The Trustees may divide the Shares of any Series
into Classes. The Trustees shall have full power and authority,
in their sole discretion, and without obtaining any prior
authorization or vote of the Shareholders of any Series, to
establish and designate and to change in any manner any such
Series or Class and to fix such preferences, voting powers,
rights and privileges of such Series or Classes as the Trustees
may from time to
1
<PAGE>
time determine, to divide or combine the Shares or any Series or
Classes into a greater or lesser number, to classify or
reclassify any issued Shares of any Series or Classes into one or
more Series or Classes, and to take such other action with
respect to the Shares as the Trustees may deem desirable. The
establishment and designation of any Series or Class shall be
effective when specified in the resolution of the Trustees
setting forth such establishment and designation and the relative
rights and preferences of the Shares of such Series or Class.
All references to Shares in this Trust Instrument shall be deemed
to be Shares of any or all Series or Classes, as the context may
require. All provisions herein relating to the Trust shall apply
equally to each Series and each Class, except as the context
otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series subject to
Section 2.08 and the preferences, rights and privileges of each
Class of that Series. Each holder of Shares of a Series or Class
thereof shall be entitled to receive the holder's pro rata share
of all distributions made with respect to such Series or Class
thereof. Upon redemption of Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the
Trust.
Each Series and Class thereof of the Trust and their attributes
will be set forth in Annex A to this Trust Instrument."
(d)(1) Investment Advisory Agreement between Registrant and Ebright
Investments, Inc.
(d)(2) Investment Sub-Advisory Agreement between Ebright Investments,
Inc. and Gouws Capital Management, Inc.
(e) Underwriting Agreement between Registrant and CW Fund
Distributors, Inc.
(f) None
(g) Custody Agreement between Registrant and Star Bank, N.A.
(h)(1) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement between Registrant and Countrywide Fund
Services, Inc.
(h)(2) Administration Agreement between Registrant and Countrywide Fund
Services, Inc.
(h)(3) Accounting Services Agreement between Registrant and Countrywide
Fund Services, Inc.
(i) Opinion of Counsel to Registrant*
(j) Consent of PricewaterhouseCoopers LLP
(k) None
(l) None
2
<PAGE>
(m) None
(n) Financial Data Schedule
(o) None
- ---------------
* Incorporated by reference to the Registrant's registration statement on Form
N-1A previously filed
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
There are no persons directly or indirectly controlled by or under
common control with the Registrant.
ITEM 25. INDEMNIFICATION
(a) Article X of the Declaration of Trust of the Registrant provides
as follows:
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
"Section 10.01 Limitation of Liability. A Trustee, when acting in
such capacity, shall not be personally liable to any Person other
than the Trust or beneficial owner for any act, omission or
obligation of the Trust or any Trustee. A Trustee shall not be
liable for any act or omission or any conduct whatsoever in his
capacity as Trustee, provided that nothing contained herein or in
the Delaware Act shall protect any Trustee against any liability
to the Trust or to Shareholders to which he 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 hereunder."
INDEMNIFICATION
"Section 10.02 Indemnification. (a) Subject to the exceptions and
limitations contained in Subsection 10.02(b): (i) every Person
who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement
thereof; (ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened while in office or thereafter, and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person: (i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the
Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was
3
<PAGE>
in the best interest of the Trust; or (ii) in the event of a
settlement, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (x) by the court or other
body approving the settlement; (y) by at least a majority of
those Trustees who are neither Interested Persons of the Trust
nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (z)
by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full
trial-type inquiry); provided, however, that any Shareholder may,
by appropriate legal proceedings, challenge any such
determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not be exclusive of or affect any other rights to which any
Covered Person may now or hereafter be entitled, shall continue
as to a Person who has ceased to be a Covered Person and shall
inure to the benefit of the heirs, executors and administrators
of such a Person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than
Covered Persons, and other Persons may be entitled by contract or
otherwise under law.
(d) Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the
character described in Subsection 10.02(a) of this Section 10.02
may be paid by the Trust or Series from time to time prior to
final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over
by him to the Trust or Series if it is ultimately determined that
he is not entitled to indemnification under this Section 10.02;
provided, however, that either (i) such Covered Person shall have
provided appropriate security for such undertaking, (ii) the
Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found
entitled to indemnification under Section 10.02."
(b)(1) Paragraph 8 of the Investment Advisory Agreement by and between
the Registrant and Ebright Investments, Inc. provides as follows:
"8. Protection of the Adviser. The Adviser shall not be liable to
the Fund or to the Series for any action taken or omitted to be
taken by the Adviser in connection with the performance of any of
its duties or obligations under this Agreement or otherwise as an
investment adviser for the Series, and the Series shall indemnify
the Adviser and hold it harmless from and against all damages,
liabilities, costs and expenses (including reasonable attorneys'
fees and amounts reasonably paid in settlement) incurred by the
Adviser in or by reason of any pending, threatened or completed
action, suit, investigation or other proceeding (including an
action or suit by or in the right of the Fund or the Series or
its security holders) arising out of or otherwise based upon any
action actually or allegedly taken or omitted to be taken by the
Adviser in connection with the performance of any of its duties
or obligations under this Agreement or otherwise as an investment
adviser for the Series. Notwithstanding the preceding sentence of
this Paragraph 8 to the contrary, nothing contained herein shall
protect or be deemed to protect the Adviser against or entitle or
be deemed to entitle the Adviser to indemnification in respect
of, any liability to the Fund or to the Series or its security
holders to which the Adviser would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard
of its duties and obligations under this Agreement.
4
<PAGE>
Determinations of whether and the extent to which the Adviser is
entitled to indemnification hereunder shall be made by reasonable
and fair means, including (a) a final decision on the merits by a
court or other body before whom the action, suit or other
proceeding was brought that the Adviser was not liable by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties or (b) in the absence of such a decision,
a reasonable determination, based upon a review of the facts,
that the Adviser was not liable by reason of such misconduct by
(i) the vote of a majority of a quorum of the Trustees of the
Fund who are neither "interested persons" of the Fund (as defined
in Section 2(a)(19) of the Investment Company Act of 1940) nor
parties to the action, suit or other proceeding, or (ii) an
independent legal counsel in a written opinion."
(b)(2) Paragraph 7 of the Investment Sub-Advisory Agreement by and
between Ebright Investments, Inc. ("EII") and Gouws Capital
Management, Inc. ("Sub-Adviser") provides as follows:
"7. Limitation of Liability. The Sub-Adviser shall not be liable
for any error of judgment or mistake of law or for any loss
suffered by the Series, the Trust or its shareholders or by EII
in connection with the matters to which this Agreement relates,
except to the extent that such a loss results from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties and obligations under this Agreement
and applicable law."
(c) Paragraphs 8 and 9 of the Distribution Agreement made by and
between the Registrant and CW Fund Distributors, Inc. provides as
follows:
"8. Indemnification of Trust.
-------------------------
Underwriter agrees to indemnify and hold harmless the Trust
and each person who has been, is, or may hereafter be a trustee,
officer, employee, shareholder or control person of the Trust,
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. Underwriter likewise agrees to indemnify and hold
harmless the Trust 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
foregoing rights of indemnification shall be in addition to any
other rights to which the Trust or each such person may be
entitled as a matter of law.
9. Indemnification of Underwriter.
-------------------------------
The Trust agrees to indemnify and hold harmless Underwriter
and each person who has been, is, or may hereafter be a director,
officer, employee, shareholder or
5
<PAGE>
control person of Underwriter against any loss, damage or expense
(including the reasonable costs of investigation) reasonably
incurred by any of them in connection with the matters to which
this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or 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."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Ebright Investments, Inc.
The descriptions of Ebright Investments, Inc. under the caption "Management
of the Trust" in the Prospectus and "Investment Advisory Services" in the
Statement of Additional Information are incorporated by reference herein.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Name Title Business Connection
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Jennifer E. Goff President, Director Ebright Investments, Inc.
- ----------------------------------------------------------------------------------------------
Ellen E. Carlton Vice President, Director Ebright Investments, Inc.
---------------------------------------------------------------
Auditor O'Neil Hagaman
1025 16th Avenue South, Ste 202
Nashville, Tennessee 37212
- ----------------------------------------------------------------------------------------------
Joyce Marie Ebright Director Ebright Investments, Inc.
---------------------------------------------------------------
Manager Ebright Properties Limited
50 Portland Pier
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
Johann Hendrikus Gouws Director Ebright Investments, Inc.
---------------------------------------------------------------
President Gouws Capital Management, Inc.
Acadia Trust, N.A.
Chairman 511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
Richard E. Curran, Jr. Director Ebright Investments, Inc.
---------------------------------------------------------------
Senior Vice President Gouws Capital Management, Inc.
Acadia Trust, N.A.
President 511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
(b) Gouws Capital Management, Inc..
The descriptions of Gouws Capital Management, Inc. ("GCMI") under the
caption "Management of the Trust" in the Prospectus and "Investment Advisory
Services" in the Statement of Additional Information are incorporated by
reference herein.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Name Title Business Connection
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Johann Hendrikus Gouws President GCMI
---------------------------------------------------------------
Chairman Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
Richard E. Curran, Jr. Senior Vice President GCMI
---------------------------------------------------------------
President Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
Senior Vice President GCMI
Frank Edward Kemna, Jr.
---------------------------------------------------------------
Senior Vice President Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
Jan Foster MacLeod Vice President, Director GCMI
of Research
- ----------------------------------------------------------------------------------------------
Gregg Allen Marston Senior Vice President GCMI
---------------------------------------------------------------
Vice President Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
John Lester Simpson Senior Vice President GCMI
---------------------------------------------------------------
Senior Vice President Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- ----------------------------------------------------------------------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) CW Fund Distributors, Inc. also acts as underwriter for the following
open-end investment companies: Atalanta/Sosnoff Investment Trust, The
Bjurman Funds, Brundage, Story and Rose Investment Trust, The Caldwell
& Orkin Funds, Inc., The James Advantage Funds, Profit Funds
Investment Trust, Firsthand Funds, Lake Shore Family of Funds, UC
Investment Trust and The Westport Funds.
(b) The following list sets forth the directors and executive officers of
the Distributor. Unless otherwise noted with an asterisk(*), the
address of the persons named below is 312 Walnut Street, Cincinnati,
Ohio 45202.
*The address is 4500 Park Granada Boulevard, Calabasas, California
91302.
7
<PAGE>
Position Position
with with
Name Distributor Registrant
---- ----------- ----------
*Angelo R. Mozilo Chairman of the None
Board/Director
*Andrew S. Bielanski Director None
*Thomas H. Boone Director None
*Marshall M. Gates Director None
Robert H. Leshner Vice Chairman/ None
Director
Robert G. Dorsey President and Vice
Treasurer President
Robert L. Bennett First Vice President None
and Chief Operating
Officer
Maryellen Peretzky Senior Vice President - None
Administration
John F. Splain First Vice President, Secretary
Secretary and
General Counsel
M. Kathleen Leugers First Vice President - None
MIS
Mark J. Seger First Vice President Treasurer
Terrie A. Wiedenheft First Vice President None
and Chief Financial
Officer
(c) Inapplicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
the Registrant pursuant to the Investment Company Act of 1940, are
maintained at the following locations:
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
8
<PAGE>
ITEM 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
Inapplicable
ITEM 30. UNDERTAKINGS
Inapplicable
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Portland, and State of Maine on the 1st day of
March, 1999.
The Winter Harbor Fund
By: /s/ Jennifer E. Goff
------------------------
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/ Jennifer E. Goff President March 1, 1999
- ------------------------------ and Trustee
Jennifer E. Goff
/s/ Mark J. Seger Treasurer March 1, 1999
- ------------------------------
Mark J. Seger
Trustee
- ------------------------------
Judith D. Freyer*
Trustee
- ------------------------------
Earl L. Mummert*
Trustee By: /s/ Tina D. Hosking
- ------------------------------ -------------------
Vincent T. Phillips* Tina D. Hosking
Attorney in Fact*
March 1, 1999
10
<PAGE>
INDEX TO EXHIBITS
(a) Trust Instrument of Registrant*
(b) None
(c) See Item 23(c) herein
(d)(1) Investment Advisory Agreement
(d)(2) Investment Sub-Advisory Agreement
(e) Underwriting Agreement
(f) None
(g) Custody Agreement
(h)(1) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement
(h)(2) Administration Agreement
(h)(3) Accounting Services Agreement
(i) Opinion of Counsel*
(j) Consent of Independent Auditors
(k) None
(l) None
(m) None
(n) Financial Data Schedule
(o) None
- ----------------------------
* Incorporated by reference to Registrant's registration statement on Form
N-1A previously filed.
11
INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE WINTER HARBOR FUND
(The REvest Value Fund)
AND
EBRIGHT INVESTMENTS, INC.
Agreement made this 25th day of September, 1998, by and between THE WINTER
HARBOR FUND, a Delaware business trust (the "Fund"), and EBRIGHT INVESTMENTS,
INC. (formerly known as Royce, Ebright & Associates, Inc.), a Connecticut
corporation (the "Adviser").
The Fund and the Adviser hereby agree as follows in respect of The REvest
Value Fund, a series of the Fund (the "Series"):
1. DUTIES OF THE ADVISER. The Adviser shall, during the term and subject to
the provisions of this Agreement, (a) determine the composition of the portfolio
of the Series, the nature and timing of the changes therein and the manner of
implementing such changes, and (b) provide the Series with such investment
advisory, research and related services as the Series may, from time to time,
reasonably require for the investment of its funds. The Adviser shall perform
such duties in accordance with the applicable provisions of the Fund's Trust
Instrument, By-Laws and current prospectus and any directions it may receive
from the Fund's Trustees. Notwithstanding any other provision hereof, the
Adviser, with the approval of the Fund, may contract with one or more
sub-advisers to perform any of the investment advisory services; provided,
however, that any compensation paid will be the sole responsibility of the
Adviser.
2. EXPENSES PAYABLE BY THE SERIES. Except as otherwise provided in
Paragraphs 1 and 3 hereof, the Fund shall be responsible for effecting sales and
redemptions of the Series' shares, for determining the net asset value thereof
and for all of the Series' other operations and shall cause the Series to pay
all administrative and other costs and expenses attributable to its operations
and transactions, including, without limitation, transfer agent and custodian
fees; legal, administrative and clerical services; rent for office space and
facilities; auditing; preparation, printing and distribution of its
prospectuses, proxy statements, shareholders' reports and notices; supplies and
postage; Federal and state registration fees; Federal, state and local taxes;
non-affiliated Trustees' fees; and brokerage commissions.
3. EXPENSES PAYABLE BY THE ADVISER. The Adviser shall furnish, without
expense to the Fund or to the Series, the services of those of its officers and
full-time employees who may be duly elected executive officers or Trustees of
the Fund, subject to their individual consent to serve and to any limitations
imposed by law, and shall pay its pro rata share of all of the salaries and
expenses of the Fund's executive officers. For purposes of this Agreement, only
the President,
<PAGE>
any Vice President and the Treasurer of the Fund shall be deemed to be executive
officers of the Fund. The Adviser shall also pay all expenses which it may incur
in performing its duties under Paragraph 1 hereof and shall reimburse the Fund
for any space leased by the Fund and occupied by the Adviser. In the event the
Fund shall qualify shares of the Series for sale in any jurisdiction, the
applicable statutes or regulations of which expressly limit the amount of the
Series' total annual expenses, the Adviser agrees to reduce its annual
investment advisory fee for the Series to the extent that such total annual
expenses (other than brokerage commissions and other capital items, interest,
taxes, distribution fees, extraordinary items and other excludable items,
charges, costs and expenses) exceed the limitations imposed on the Series by the
most stringent regulations of any such jurisdiction.
4. COMPENSATION OF THE ADVISER. The Fund agrees to cause the Series to pay
to the Adviser, and the Adviser agrees to accept, as compensation for the
services provided by the Advisor hereunder, advisory fees equal to 1% per annum
of the first $50,000,000 of the Series' average net assets and 0.75% per annum
of additional average net assets over $50,000,000. For purposes of calculating
these fees, average net assets will mean the average net assets of the Series at
the close of business on each day that the value of its net assets is computed
during the year. However, the Fund and the Adviser may agree in writing to
temporarily or permanently reduce such fee. Such compensation shall be accrued
on the Series' books at the close of business on each day that the value of its
net assets is computed during each year and shall be payable to the Adviser
monthly, on the last day of each month, and adjusted as of year-end if required.
5. EXCESS BROKERAGE COMMISSIONS. The Adviser is hereby authorized, to the
fullest extent now or hereafter permitted by law, to cause the Series to pay a
member of a national securities exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of such exchange, broker or dealer would have charged
for effecting that transaction, if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and/or research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or its overall
responsibilities with respect to the Series.
6. ACTIVITIES OF THE ADVISER. The Adviser may engage in any other business
or render services to others, provided that the Adviser shall disclose such
activities to the Fund. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Adviser to engage in any other
business or to devote his or her time and attention in part to any other
business, whether of a similar or dissimilar nature. So long as this Agreement
or any extension, renewal or amendment remains in effect, the Adviser shall be
the only investment adviser for the Series, subject to the Adviser's right to
enter into sub-advisory agreements. The Adviser assumes no responsibility under
this Agreement other than to render the services called for hereunder, and shall
not be responsible for any action of or directed by the Fund's Trustees, or any
committee thereof, unless such action has been caused by the Adviser's gross
negligence, willful malfeasance, bad faith or reckless disregard of its
obligations and duties under this Agreement.
7. RESPONSIBILITY OF DUAL DIRECTORS, OFFICERS AND/OR EMPLOYEES. If any
person who is a director, officer or employee of the Adviser is or becomes a
Trustee, officer and/or employee of the Fund and acts as such in any business of
the Fund pursuant to this Agreement, then such
2
<PAGE>
director, officer and/or employee of the Adviser shall be deemed to be acting in
such capacity solely for the Fund, and not as a director, officer or employee of
the Adviser or under the control or direction of the Adviser, although paid by
the Adviser.
8. PROTECTION OF THE ADVISER. The Adviser shall not be liable to the Fund
or to the Series for any action taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser for the Series, and the Series
shall indemnify the Adviser and hold it harmless from and against all damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
amounts reasonably paid in settlement) incurred by the Adviser in or by reason
of any pending, threatened or completed action, suit, investigation or other
proceeding (including an action or suit by or in the right of the Fund or the
Series or its security holders) arising out of or otherwise based upon any
action actually or allegedly taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser for the Series. Notwithstanding
the preceding sentence of this Paragraph 8 to the contrary, nothing contained
herein shall protect or be deemed to protect the Adviser against or entitle or
be deemed to entitle the Adviser to indemnification in respect of, any liability
to the Fund or to the Series or its security holders to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its duties and obligations under this Agreement.
Determinations of whether and the extent to which the Adviser is entitled
to indemnification hereunder shall be made by reasonable and fair means,
including (a) a final decision on the merits by a court or other body before
whom the action, suit or other proceeding was brought that the Adviser was not
liable by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties, or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Adviser was not liable
by reason of such misconduct by (i) the vote of a majority of a quorum of the
Trustees of the Fund who are neither "interested persons" of the Fund (as
defined in Section 2(a) (19) of the Investment Company Act of 1940) nor parties
to the action, suit or other proceeding, or (ii) an independent legal counsel in
a written opinion.
9. EFFECTIVENESS, DURATION AND TERMINATION OF AGREEMENT. This Agreement
shall become effective on the later of (i) the date hereof, or (ii) the date on
which this Agreement is approved by the sole shareholder of the Series. This
Agreement shall remain in effect until the two year anniversary of such
effective date, and thereafter shall continue automatically for successive
annual periods, PROVIDED THAT such continuance is specifically approved at least
annually by (a) the vote of the Fund's Trustees, including a majority of such
Trustees who are not parties to this Agreement or "interested persons" (as such
term is defined in Section 2(a)(19) of the Investment Company Act of 1940) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, or (b) the vote of a majority of the outstanding voting
securities of the Series and the vote of the Fund's Trustees, including a
majority of such Trustees who are not parties to this Agreement or "interested
persons" (as so defined) of any such party. This Agreement may be terminated at
any time, without the payment of any penalty, on 60 days' written notice by the
vote of a majority of the outstanding voting securities of the Series, or by the
vote of a majority of the Fund's Trustees or by the Adviser, and will
automatically terminate in the
3
<PAGE>
event of its "assignment" (as such term is defined for purposes of Section
15(a)(4) of the Investment Company Act of 1940); PROVIDED, HOWEVER, that the
provisions of Paragraph 8 of this Agreement shall remain in full force and
effect, and the Adviser shall remain entitled to the benefits thereof,
notwithstanding any such termination.
10. SHAREHOLDER LIABILITY. Notice is hereby given that this Agreement is
entered into on the Fund's behalf by an officer of the Fund in his capacity as
an officer and not individually and that the obligations of or arising out of
this Agreement are not binding upon any of the Fund's Trustees, officers,
employees, agents or shareholders individually, but are binding only upon the
assets and property of the Series.
11. NOTICES. Any notice under this Agreement shall be given in writing,
addressed and delivered or mailed, postage prepaid, to the other party at its
principal office.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
THE WINTER HARBOR FUND
By: /s/ Jennifer E. Goff
------------------------------
Jennifer E. Goff, President
EBRIGHT INVESTMENTS, INC.
By: /s/ Jennifer E. Goff
------------------------------
Jennifer E. Goff, President
INVESTMENT SUB-ADVISORY AGREEMENT
---------------------------------
This Agreement is made as of September 25, 1998, by and between EBRIGHT
INVESTMENTS, INC. (formerly known as Royce, Ebright & Associates, Inc.), a
Connecticut corporation ("EII"), and GOUWS CAPITAL MANAGEMENT, INC., a Maine
corporation (the "Sub-Adviser").
WHEREAS, EII has entered into an Investment Advisory Agreement dated as of
September 25, 1998, with The Winter Harbor Fund Group (the "Trust"), an open-end
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, EII wishes to retain the Sub-Adviser as sub-adviser to furnish
certain investment advisory services to EII and REvest Value Fund, a series of
the Trust (the "Series"), and the Sub-Adviser is willing to furnish such
services.
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. EII hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Series for the period and on the terms set forth
in this Agreement. The Sub-Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision of the Trust's Board of Trustees (the
"Board") and EII, the Sub-Adviser will provide a continuous investment program
for the Series, including investment research. Although EII alone will determine
the investments that will be purchased, retained or sold by the Series, the
Sub-Adviser will assist EII in such determinations. The Sub-Adviser will, at the
direction of EII, be responsible for placing purchase and sell orders for
investments with broker-dealers, and for other related transactions. The
Sub-Adviser will provide services under this Agreement in accordance with the
Series's investment objectives, policies and restrictions as stated in the
Series's Prospectus.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution; provided
that, on behalf of the Series, the Sub-Adviser may, in its discretion, use
brokers who provide the Series with analysis and other research services to
execute portfolio transactions on behalf of the Series, and the Sub-Adviser may
pay to those brokers in return for brokerage and research services a higher
commission than may be charged by other brokers, subject to the Sub-Adviser's
determining in good faith that (i) such commission is reasonable in terms either
of the particular transaction or of the overall responsibility of the
Sub-Adviser and its affiliates to the Series and its other clients, and (ii) the
total commissions paid by the Series will be reasonable in relation to the
benefits to the Series over the long term. In no instance will portfolio
securities be purchased from or sold to the Sub-
<PAGE>
Adviser, or any affiliated person thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder. Whenever the
Sub-Adviser simultaneously places orders to purchase or sell the same security
on behalf of the Series and one or more other accounts advised by the
Sub-Adviser, such orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable to each account. EII recognizes
that in some cases this procedure may adversely affect the results obtained for
the Series.
(c) The Sub-Adviser will maintain all books and records required to be
maintained by the Sub-Adviser pursuant to the 1940 Act and the rules and
regulations promulgated thereunder with respect to transactions on behalf of the
Series, and will furnish the Board and EII with such periodic and special
reports as the Board or EII reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records which it maintains for the Series are the property of the
Trust, agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any records which it maintains for the Trust and which are required to
be maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Trust any records which it maintains for the Trust upon request
by the Trust.
(d) At such times as shall be reasonably requested by the Board or EII, the
Sub-Adviser will provide the Board and EII with investment analyses and reports
and make available to the Board and EII any statistical and investment services
normally available to similar investment companies based on industry standards.
3. FURTHER DUTIES. In all matters relating to the performance of this
Agreement, the Sub-Adviser will act in conformity with the Trust's Declaration
of Trust, By-Laws and registration statement under the 1940 Act as may be in
effect from time to time, and any amendments or supplements thereto
("Registration Statement") and with the written instructions and directions of
the Board and EII. The Sub-Adviser will comply with the requirements of the 1940
Act, the Investment Advisers Act of 1940 ("Advisers Act"), the rules thereunder,
and all other applicable federal and state laws and regulations. EII agrees to
provide to the Sub-Adviser, upon request, copies of the Trust's Declaration of
Trust, By-Laws, Registration Statement, written instructions and directions of
the Board and EII, and any amendments or supplements to any of them, as soon as
practicable after such materials become available.
4. SERVICES NOT EXCLUSIVE. The services furnished by the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Sub-Adviser who may also be a
trustee, officer or employee of the Trust, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar nature or a dissimilar nature.
5. EXPENSES. During the term of this Agreement, the Sub-Adviser will bear
all expenses incurred by it in connection with its services under this
Agreement.
2
<PAGE>
6. COMPENSATION.
(a) For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Agreement, EII will pay to the Sub-Adviser a fee,
computed daily and payable monthly, at an annual rate equal to 50% of the
Advisory Fee received by EII from the Trust with respect to the Series pursuant
to the Advisory Agreement, less costs and expenses incurred by EII associated
therewith. The Sub-Adviser and EII acknowledge that, in addition to the
compensation set forth herein, each of the Sub-Adviser and EII have rights,
obligations, and duties arising under a certain Letter of Intent by and among
the Sub-Adviser, EII, and Acadia Trust, N.A., dated December 30, 1997 (the
"Letter"). To the extent that the terms of this Section 6 conflict with the
terms of the Letter, the terms of the Letter shall control.
(b) The fee shall be accrued daily and payable monthly to the Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(c) If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
7. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Series, the
Trust or its shareholders or by EII in connection with the matters to which this
Agreement relates, except to the extent that such a loss results from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties and obligations under this Agreement and applicable law.
8. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants and
agrees as follows:
(a) The Sub-Adviser: (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the authority to
enter into and perform the services contemplated by this Agreement; and (v) will
immediately notify EII of the occurrence of an event that would disqualify the
Sub-Adviser from serving as an investment adviser of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise.
(b) The Sub-Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide EII with a copy
of such code of ethics, together with evidence of its adoption. Within 45 days
after the end of the last calendar
3
<PAGE>
quarter of each year that this Agreement is in effect, the president or a
vice-president of the Sub-Adviser shall certify to EII that the Sub-Adviser has
complied with the requirements of Rule 17j-1 during the previous year and that
there has been no violation of the Sub-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 EII, the Sub-Adviser shall permit EII,
its employees or its agents to examine the reports required to be made to the
Sub-Adviser by Rule 17j-1(c)(1) and all other records relevant to the
Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided EII with a copy of its Form ADV as most
recently filed with the Securities and Exchange Commission ("SEC") and will,
promptly after filing any amendment to its Form ADV with the SEC, furnish a copy
of such amendment to EII.
9. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date first above
written, provided that this Agreement shall not take effect unless it has first
been approved (i) by a vote of a majority of those trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Series's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from its effective date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (i) by a vote of a majority of those trustees of the Trust who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or by vote of a majority of the outstanding voting securities
of the Series.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the outstanding voting securities of the Series on 60 days' written
notice to the Trust and the Sub-Adviser. This Agreement may also be terminated
by EII: (i) on 120 days' written notice to the Trust and the Sub-Adviser,
without the payment of any penalty; (ii) upon material breach by the Sub-Adviser
of any of the representations and warranties set forth in Paragraph 8 of this
Agreement, if such breach shall not have been cured within a 20 day period after
notice of such breach; or (iii) if the Sub-Adviser becomes unable to discharge
its duties and obligations under this Agreement. The Sub-Adviser may terminate
this Agreement at any time, without the payment of any penalty, on 120 days'
notice to EII. This Agreement will terminate automatically in the event of its
assignment or upon termination of the Advisory Agreement.
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by vote of a majority of the
4
<PAGE>
Series's outstanding voting securities.
11. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Maine, without giving effect to the conflicts of laws
principles thereof, and the 1940 Act. To the extent that the applicable laws of
the State of Maine conflict with the applicable provisions of the 1940 Act, the
latter shall control.
12. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision or this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell," and "security" shall have the same
meaning as such terms have in the 1940 Act, subject to such exemption as may be
granted by the SEC by any rule, regulation or order. Where the effect of a
requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed, as an instrument under seal, by their duly authorized signatories as
of the date and year first above written.
EBRIGHT INVESTMENTS, INC.
By: /s/ Jennifer E. Goff
------------------------------
Jennifer E. Goff, President
GOUWS CAPITAL MANAGEMENT, INC.
By: /s/ Johann Gouws
------------------------------
Name: Johann Gouws
Title: President
UNDERWRITING AGREEMENT
----------------------
This Agreement made as of September 22, 1998 by and between The Winter
Harbor Fund (the "Trust"), a Delaware business trust and an open-end registered
investment company, and CW Fund Distributors, Inc., a Delaware corporation
("Underwriter").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Trust 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 (the "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 the 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
<PAGE>
terminate, suspend or withdraw the offering of Shares whenever, in its sole
discretion, it deems such action to be desirable.
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(d) hereof) 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 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.
(d) The public offering price for the Shares of each Series shall be
the respective net asset value of the 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
- 2 -
<PAGE>
Securities and Exchange Commission promulgated thereunder. In no event shall any
applicable sales charge exceed the maximum sales charge permitted by the Rules
of the NASD.
(e) The net asset value of the 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 the 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.
(f) On every sale, the Trust shall receive the applicable net asset
value of the 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 the Shares.
(g) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Trust or its transfer agent for registration of the
Shares purchased.
(h) 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
- 3 -
<PAGE>
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.
(i) Underwriter, as agent of and for the account of the Trust, may
repurchase the 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.
5. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules 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
- 4 -
<PAGE>
the public offering price of the 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 the
Shares, any representations concerning the 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 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.
- 5 -
<PAGE>
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. Fees and Expenses.
------------------
For performing its services under this Agreement, Underwriter will
receive a fee of $5,000 per year. Fees shall be paid monthly in arrears. The
Underwriter shall be promptly reimbursed for any expenses which are to be paid
by the Trust in accordance with the following paragraph.
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 the Shares. All other costs in connection
with the offering of the Shares will be paid by the Trust in accordance with
agreements between them as permitted by applicable law, including the Act and
rules and regulations promulgated thereunder. These costs include, but are not
limited to, licensing fees, filing fees, travel and such other expenses as may
be incurred by Underwriter on behalf of the Trust.
- 6 -
<PAGE>
8. Indemnification of Trust.
-------------------------
Underwriter agrees to indemnify and hold harmless the Trust and each
person who has been, is, or may hereafter be a trustee, officer, employee,
shareholder or control person of the Trust, 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. Underwriter
likewise agrees to indemnify and hold harmless the Trust 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 foregoing rights of
indemnification shall be in
- 7 -
<PAGE>
addition to any other rights to which the Trust or each such person may be
entitled as a matter of law.
9. Indemnification of Underwriter.
-------------------------------
The Trust agrees to indemnify and hold harmless Underwriter and each
person who has been, is, or may hereafter be a director, officer, employee,
shareholder or control person of Underwriter against any loss, damage or expense
(including the reasonable costs of investigation) reasonably incurred by any of
them in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or 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)
- 8 -
<PAGE>
by Underwriter, (ii) either by action of the Board of Trustees of 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. 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.
- 9 -
<PAGE>
Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each series of the Trust are separate
and distinct from the assets and liabilities of each other series and that no
series shall be liable or shall be charged for any debt, obligation or liability
of any other series, whether arising under this Agreement or otherwise.
13. Successor Investment Trust.
---------------------------
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.
14. 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.
15. Questions of Interpretation.
----------------------------
(a) This Agreement shall be governed by the laws of the State of
Delaware.
(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
- 10 -
<PAGE>
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.
16. 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.
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
- 11 -
<PAGE>
511 Congress Street, Portland, Maine 04101, and that the address of Underwriter
for this purpose shall be 312 Walnut Street, Cincinnati, Ohio 45202.
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: THE WINTER HARBOR FUND
By: /s/ Jennifer E. Goff
- ----------------------------- -----------------------------
Its:President
ATTEST: CW FUND DISTRIBUTORS, INC.
/s/ John F. Splain By: /s/ Robert G. Dorsey
- ----------------------------- -----------------------------
Its:President
- 12 -
CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of September 22, 1998, by and between the Winter
Harbor Fund (the "Trust"), a business trust organized under the laws of the
Delaware, acting with respect to the Revest Value Fund, (the "Fund"), a series
of the Trust and 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 Fund's 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:
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 Fund 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.
<PAGE>
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 the 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.
1.6 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.7 "OFFICER" shall mean the Chairman, 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.
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 Fund) 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.
<PAGE>
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 the Fund.
1.13 "SUB-CUSTODIAN" shall mean and include (i) any branch of a "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, having a contract with the Custodian which the Custodian has
determined will provide reasonable care of assets of the Funds based on the
standards specified in Section 3.3 below. Such contract shall include provisions
that provide: (i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that the Funds will be adequately protected
against the risk of loss of assets held in accordance with such contract; (ii)
that the Funds' assets will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the Sub-Custodian or its
creditors except a claim of payment for their safe custody or administration, in
the case of cash deposits, liens or rights in favor of creditors of the
Sub-Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that
beneficial ownership for the Funds' assets will be freely transferable without
the payment of money or value other than for safe custody or administration;
(iv) that adequate records will be maintained identifying the assets as
belonging to the funds or as being held by a third party for the benefit of the
Funds; (v) that the Funds' independent public accountants will be given access
to those records or confirmation of the contents of those records; and (vi) that
the Funds will receive periodic reports with respect to the safekeeping of the
Funds' assets, including, but not limited to, notification of any transfer to or
from a Fund's account or a third party account containing assets held for the
benefit of the Fund. Such contract may contain, in lieu of any or all of the
provisions specified above, such other provisions that the Custodian determines
will provide, in their entirety, the same or a greater level of care and
protection for Fund assets as the specified provisions, in their entirety.
<PAGE>
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.
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 Fund
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 the 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.
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 Fund.
<PAGE>
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of the 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 the 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 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 Fund, 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) At the end of each calendar quarter, the Custodian shall provide
written reports notifying the Board of Trustees of the placement of the
Securities and cash of the Funds with a particular Sub-Custodian and of any
material changes in the Funds' arrangements. The Custodian shall promptly take
such steps as may be required to withdraw assets of the Funds
<PAGE>
from any Sub-Custodian that has ceased to meet the requirements of Rule 17f-5
under the 1940 Act.
(e) With respect to its responsibilities under this Section 3.3, the
Custodian hereby warrants to the Trust that it agrees to exercise reasonable
care, prudence and diligence such as a person having responsibility for the
safekeeping of property of the Funds. The Custodian further warrants that a
Fund's assets will be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, if maintained with each
Sub-Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation: (i) the Sub-Custodian's practices,
procedures, and internal controls, for certificated securities (if applicable),
the method of keeping custodial records, and the security and data protection
practices; (ii) whether the Sub-Custodian has the requisite financial strength
to provide reasonable care for Fund assets; (iii) the Sub-Custodian's general
reputation and standing and, in the case of a Securities Depository, the
Securities Depository's operating history and number of participants; and (iv)
whether the Fund will have jurisdiction over and be able to enforce judgments
against the Sub-Custodian, such as by virtue of the existence of any offices of
the Sub-Custodian in the United States or the Sub-Custodian's consent to service
of process in the United States.
(f) The Custodian shall establish a system to monitor the appropriateness
of maintaining the Fund's assets with a particular Sub-Custodian and the
contract governing the Funds' arrangements with such Sub-Custodian.
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 Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund 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 Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
<PAGE>
(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 ("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 the 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.
(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 Fund 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
<PAGE>
shall be liable to the Trust for any loss or damage to the 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 Fund arising from the use of
such Book-Entry System or Securities Depository, if and to the extent that the
Funds has not been made whole for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from the 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 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;
<PAGE>
(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
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.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNT. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from the
Fund Custody Account but only in the following cases:
<PAGE>
(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;
(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
<PAGE>
requiring a pledge of assets by 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 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 the
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
<PAGE>
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") 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 the 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 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
Fund, 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
<PAGE>
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 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 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 of
the Securities and moneys held by the Custodian and the Sub-Custodians for the
Fund under this 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 the 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.
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 Fund with respect to optional tender or exchange
offers, calls for redemption or purchase, or
<PAGE>
expiration of rights as described in the Standards of Service Guide attached as
Appendix 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 FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by such Fund pay
out of the moneys held for the account of a 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 the Fund, if in the 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
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom
<PAGE>
such Securities are to be delivered. Upon 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 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 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 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 the Fund to use funds so
credited to the 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 the Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
<PAGE>
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 the 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.
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 the 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 Trust 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 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
<PAGE>
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.
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 the Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Trust's charter documents or by-laws, 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 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
<PAGE>
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 the 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 to the entity or entities 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
<PAGE>
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 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 therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 SECURITY. If the Custodian advances cash or Securities to the 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 the Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to
<PAGE>
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; 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 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 Fund
and held by the Custodian as custodian,
<PAGE>
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 corporation 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 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 Fund are set forth in Appendix 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 property of
the Trust as provided in the Trust's Agreement
<PAGE>
and Articles of Incorporation, 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 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 corporation property of the Trust as provided in the
above-mentioned Agreement and Articles of Incorporation.
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:
-------------
Winter Harbour Fund
511 Congress Street, 9th Floor
Portland, Maine 04101
(800) 277-5573
ATTORNEY
--------
Wayne E. Tumlin
Bernstein, Shur, Sawyer & Nelson, T.A.
100 Middle Street
P.O. Box 9729
Portland, Maine 04104-5029
(207) 774-1200
TO CUSTODIAN:
-------------
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632-4432
Facsimile: (513) 632-3299
<PAGE>
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.
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 the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. 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.
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.
<PAGE>
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: Winter Harbor Fund
/s/ Wayne E. Tumlin By: /s/ Jennifer E. Goff
- ----------------------------- ----------------------------
ATTEST: STAR BANK, N.A.
/s/ Mark J. Dowling By: /s/ Marsha A. Croxton
- ----------------------------- ----------------------------
Marsha A. Croxton
Senior Vice President
<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.
AUTHORIZED PERSONS SPECIMEN SIGNATURES
President: /s/ Jennifer E. Goff
--------------------------------
Secretary: /s/ John F. Splain
--------------------------------
Treasurer: /s/ Mark J. Seger
--------------------------------
Vice President: /s/ Robert G. Dorsey
--------------------------------
Adviser Employees: --------------------------------
--------------------------------
<PAGE>
Transfer Agent/Fund Accountant
Employees: Robert G. Dorsey /s/ Robert G. Dorsey
--------------------------------
John F. Splain /s/ John F. Splain
--------------------------------
Mark J. Seger /s/ Mark J. Seger
--------------------------------
M. Kathleen Leugers /s/ M. Kathleen Leugers
--------------------------------
Gary H. Goldschmidt /s/ Gary H. Goldschmidt
--------------------------------
Tina D. Hosking /s/ Tina D. Hosking
--------------------------------
Theresa M. Samocki /s/ Theresa M. Samocki
--------------------------------
<PAGE>
EXHIBIT B
STAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Star Bank, N.A. is committed to providing superior quality service to all
customers and their agents at all times. We have compiled this guide as a tool
for our clients to determine our standards for the processing of security
settlements, payment collection, and capital change transactions. Deadlines
recited in this guide represent the times required for Star Bank to guarantee
processing. Failure to meet these deadlines will result in settlement at our
client's risk. In all cases, Star Bank will make every effort to compete all
processing on a timely basis.
Star Bank is a direct participant of the Depository Trust Company, a direct
member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust
Company as its agent for ineligible and foreign securities.
For corporate reorganizations, Star Bank utilizes SEI's Reorg Source,
Financial Information, Inc., XCITEK, DTC Important Notices, and the WALL STREET
JOURNAL.
For bond calls and mandatory puts, Star Bank utilizes SEI's Bond Source,
Kenny Information Systems, Standard & Poor's Corporation, and DTC Important
Notices. Star Bank will not notify clients of optional put opportunities.
Any securities delivered free to Star Bank or its agents must be received
three (3) business days prior to any payment or settlement in order for the Star
Bank standards of service to apply.
Should you have any questions regarding the information contained in this
guide, please feel free to contact your account representative.
The information contained in this Standards of Service Guide is
subject to change. Should any changes be made Star Bank will provide
you with an updated copy of its Standards of Service Guide.
<PAGE>
<TABLE>
<CAPTION>
STAR BANK SECURITY SETTLEMENT STANDARDS
<S> <C> <C>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
DTC 1:30 P.M. on Settlement Date DTC Participant #2219
Agent Bank ID#27895
Institutional #__________
For Account #____________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
for Star Bank, N.A. ABA# 042000013
For Account #_____________
Federal Reserve Book Entry (Repurchase 1:00 P.M. on Settlement Date Federal Reserve Bank of Cinti/Spec
Agreement Collateral Only) for Star Bank, N.A. ABA# 042000013
For Account #_____________
PTC Securities 12:00 P.M. on Settlement Date PTC For Account BTRST/CUST
(GNMA Book Entry) Sub Account: Star Bank, N.A. #090334
Physical Securities 9:30 A.M. EST on Settlement Date Bankers Trust Company
(for Deliveries, by 4:00 P.M. on 16 Wall Street 4th Floor, Window 43
Settlement Date minus 1) for Star Bank Account #090334
CEDEL/EURO-CLEAR 11:00 A.M. on Settlement Date minus 2 Euroclear Via Cedel Bridge
In favor of Bankers Trust Comp
Cedel 53355
For Star Bank Account #501526354
Cash Wire Transfer 3:00 P.M. Star Bank,N.A. Cinti/Trust ABA# 042000013
Credit Account #9901877
Further Credit to ___________
Account # _______________
</TABLE>
* All times listed are Eastern Standard time.
<PAGE>
STAR BANK PAYMENT STANDARDS
SECURITY TYPE INCOME PRINCIPAL
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1 Payable Date + 1
CMOs *
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment will be made
on the immediately following business day.
<PAGE>
STAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
TO STAR BANK POSTING
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior to 5 business days prior to expiration Upon receipt
and Optional Mergers expiration or receipt of notice
Mandatory Puts with Later of 10 business days prior to 5 business days prior to expiration Upon receipt
Option to Retain expiration or receipt of notice
Class Actions 10 business days prior to expiration date 5 business days prior to expiration Upon receipt
Voluntary Tenders, Later of 10 business days prior to 5 business days prior to expiration Upon receipt
Exchanges, expiration or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or securities received None Upon receipt
Liquidations, Bankruptcies, Stock
Splits, Mandatory Exchanges
Full and Partial Calls Later of 10 business days prior to None Upon receipt
expiration or receipt of notice
</TABLE>
NOTE: Fractional shares/par amounts resulting from any of the above will be
sold.
<PAGE>
EXHIBIT C
STAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
<PAGE>
STAR BANK, N.A.
PROPOSED DOMESTIC CUSTODY FEE SCHEDULE FOR REVEST VALUE FUND
Star Bank, N.A., as Custodian, will receive monthly compensation for services
according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
---------------------------
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed
through DTC or Federal Reserve $ 9.00
(c) For each portfolio transaction processed
through our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each option/future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange:
II. MARKET VALUE FEE
----------------
Based upon an annual rate of: MILLION
-------
.0002 (2 Basis Points) on First $50
.00015 (1.5 Basis Points) on Next $150
.00010 (1.0 Basis Points) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $300.00
----------------------------
IV. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be shipping
fees or transfer fees.
V. EARNINGS CREDITS
----------------
On a monthly basis any earnings credits generated from uninvested custody
balances will be applied against any cash management service fees
generated. Earnings credits are based on a Cost of Funds Tiered Earnings
Credit Rate.
REVISED APRIL 14, 1998
<PAGE>
STAR BANK, N.A.
PROPOSED CASH MANAGEMENT FEE SCHEDULE FOR REVEST VALUE FUND
SERVICES UNIT COST ($) MONTHLY COST ($)
-------- ------------- ----------------
D.D.A. Account Maintenance 15.00
Deposits .42
Deposited Items .109
Checks Paid .159
Balance Reporting - P.C. Access 50.00 1st Acct
35.00 each add'l
ACH Transaction .105
ACH Monthly Maintenance 40.00
ACH Additions, Deletions, Changes 6.00
ACH Stop Payment 5.00
ACH Debits .12
Deposited Items Returned 6.00
International Items Returned 10.00
NSF Returned Checks 25.00
Stop Payments 22.00
Data Transmission per account 115.00
Drafts Cleared .179
Lockbox Maintenance 60.00
Lockbox items Processed .34
Miscellaneous Lockbox items .12
Positive Pay .06
Issued Items .015
Invoicing for Service Charge 15.00
Wires Incoming
Domestic 11.00
International 11.00
Wires Outgoing
Domestic International
Repetitive 14.00 Repetitive 35.00
Non-Repetitive 13.00 Non-Repetitive 40.00
PC - Initiated Wires:
Domestic International
Repetitive 10.00 Repetitive 25.00
Non-Repetitive 11.00 Non-Repetitive 25.00
Customer Initiated 9.00
Uncollected Charge -- Star Bank Prime Rate as of first of month plus 4%
Other available cash management services are priced separately.
Revised July 1, 1998
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
--------------------------------------------------
AND PLAN AGENCY AGREEMENT
-------------------------
AGREEMENT dated as of September 22, 1998 between The Winter Harbor Fund, a
Delaware 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;
- 1 -
<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. 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 provided in this
Agreement or any other agreement between the parties hereto, to monitor the
issuance of such shares or to take cognizance of any laws relating to the issue
or sale of such shares.
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
- 2 -
<PAGE>
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 the
principal 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.
- 3 -
<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
- 4 -
<PAGE>
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
- 5 -
<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
- 6 -
<PAGE>
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.
- 7 -
<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;
- 8 -
<PAGE>
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.
- 9 -
<PAGE>
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
- 10 -
<PAGE>
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, 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
- 11 -
<PAGE>
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 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 negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
D. Countrywide agrees to indemnify and hold harmless the Trust, its
employees, agents, officers, control persons, affiliates and Trustees, against
and from any and all claims, demands, expenses, judgments, losses, charges
(including attorneys' fees), liabilities (whether with or without basis in fact
or law) and other reasonable expenses arising out of Countrywide's actions or
omissions in the performance of Countrywide's duties or obligations under this
Agreement by
- 12 -
<PAGE>
reason of Countrywide's, or its directors, officers, employees, shareholders,
agents, control persons, or affiliates, willful misfeasance, bad faith, or
negligence, or by reason of reckless disregard by any of such persons of the
obligations and duties of Countrywide under this Agreement.
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 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.
- 13 -
<PAGE>
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.
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 Delaware.
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: The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Attention: Jennifer Ebright Goff
- 14 -
<PAGE>
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.
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. SEPARATE LIABILITIES
--------------------
Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each series of the Trust are separate
and distinct from the assets and liabilities of each other series and that no
series shall be liable or shall be charged for any debt, obligation or liability
of any other series, whether arising under this Agreement or otherwise.
42. 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
- 15 -
<PAGE>
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.
43. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE WINTER HARBOR FUND
By: /s/ Jennifer E. Goff
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
Its: President
- 16 -
<PAGE>
Schedule A
----------
COMPENSATION
------------
Services FEE
- -------- ---
As Transfer Agent,
Dividend Disbursing Agent
and Shareholder Servicing Agent: (Per Account)
The REvest Value Fund Payable monthly at rate of
$20.00/year; subject to a
minimum of $1,250 per month
- 17 -
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT dated as of September 22, 1998 between The Winter Harbor Fund, a
Delaware 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;
<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 and manage all aspects of the Trust's operations
with respect to each series of the Trust not otherwise supervised by Ebright
Investments, Inc., or any other investment adviser or investment sub-adviser
(collectively, the "Adviser"), or any other service provider retained by the
Trust. Without limiting the generality of the foregoing, with respect to the
Trust or each series, as applicable, Countrywide shall:
A. provide the Trust with, or arrange for the provision of, the services
of persons competent to perform such legal, administrative and
clerical functions not otherwise described in this Section 3 as are
necessary to provide effective operation of the Trust;
B. oversee (i) the preparation and maintenance by the Adviser and the
Trust's custodian, transfer agent, dividend disbursing agent and fund
accountant in such form, for such periods and in such locations as may
be required by applicable United States law, of all documents and
records relating to the operation of the Trust required to be prepared
or maintained by the Trust or its agents pursuant to applicable law;
(ii) the reconciliation of account information and balances among the
Adviser and the Trust's custodian, transfer agent, dividend disbursing
agent and fund accountant; (iii) the transmission of purchase and
redemption orders for shares of any and each series ("Shares"); (iv)
the notification to the Adviser of available funds for investment; and
(v) the performance of fund accounting, including the calculation of
the net asset value of the Shares;
- 2 -
<PAGE>
C. oversee the performance of administrative and professional services
rendered to the Trust by others, including its custodian, transfer
agent, dividend disbursing agent, and fund accountant, as well as
legal, auditing, shareholder servicing and other services performed
for each series;
D. file or oversee the filing of each document required to be filed by
the Trust in either written or, if required, electronic format (e.g.,
electronic data gathering analysis and retrieval system or "EDGAR")
with the SEC;
E. assist in and oversee the preparation, filing and printing and the
periodic updating of the Trust's registration statement and
prospectuses;
F. oversee the preparation and filing of the Trust's tax returns;
G. oversee the preparation of financial statements and related reports to
the Trust's shareholders, the SEC and state and other securities
administrators;
H. assist in and oversee the preparation and printing of proxy and
information statements and any other communications to shareholders;
I. provide the Trust with adequate general office space and facilities;
J. assist the Adviser in monitoring series holdings for compliance with
prospectus investment restrictions and assist in preparation of
periodic compliance reports;
K. prepare, file and maintain the Trust's organizational documents and
minutes of meetings of the Trustees, board committees and
shareholders;
L. prepare and disseminate materials for meetings of the Trustees (with
the cooperation of the Trust's counsel, the Adviser, the officers of
the Trust and other relevant parties);
M. maintain the Trust's existence and good standing under applicable
state law;
- 3 -
<PAGE>
N. monitor sales of Shares, ensure that the Shares are properly and duly
registered with the SEC and register, or prepare applicable filings
with respect to, the Shares with the various state and other
securities commissions;
O. oversee the calculation of performance data for dissemination to
information services covering the investment company industry, for
sales literature of the Trust and other appropriate purposes;
P. oversee the determination of the amount of, and supervise the
declaration of, dividends and other distributions to shareholders as
necessary to, among other things, maintain the qualification of each
series as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"), and prepare and distribute to
appropriate parties notices announcing the declaration of dividends
and other distributions to shareholders;
Q. advise the Trust and the Trustees on matters concerning the Trust and
its affairs;
R. calculate, review and account for series expenses and report on series
expenses on a periodic basis;
S. authorize the payment of Trust expenses and pay, from Trust assets,
all bills of the Trust (upon approval of the Adviser);
T. prepare series budgets, pro-forma financial statements, expense and
profit/loss projections and fee waiver/expense reimbursement
projections on a periodic basis;
U. prepare financial statement expense information;
V. assist the Trust in the selection of other service providers, such as
independent accountants, law firms and proxy solicitors;
W. perform such other recordkeeping, reporting and other tasks
customarily performed by fund administrators and as may be specified
from time to time in the procedures adopted by the Trustees; and
X. provide the Trust with personnel suitable to serve as officers of the
Trust if so elected by the Trustees; provided that the Trust shall
reimburse Countrywide the reasonable out-of-pocket expenses incurred
by such personnel in attending Trustees' meetings and shareholders'
meetings of the Trust.
- 4 -
<PAGE>
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 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 .09% of
such series' average daily net assets up to $100 million; .075% of such assets
from $100 to $200 million; and .05% of such assets in excess of $200 million;
provided, however, that the minimum fee shall be $2,000 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.
- 5 -
<PAGE>
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.
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
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
- 6 -
<PAGE>
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
negligence, willful misconduct, bad faith, or reckless disregard of its or their
own duties hereunder.
D. Countrywide agrees to indemnify and hold harmless the Trust, its
employees, agents, officers, control persons, affiliates and Trustees, against
and from any and all claims, demands, expenses, judgments, losses, charges
(including attorneys' fees), liabilities (whether with or without basis in fact
or law) and other reasonable expenses arising out of Countrywide's actions or
omissions in the performance of Countrywide's duties or obligations under this
Agreement by reason of Countrywide's, or its directors, officers, employees,
shareholders, agents, control persons, or affiliates, willful misfeasance, bad
faith, or negligence, or by reason of reckless disregard by any of such persons
of the obligations and duties of Countrywide under this Agreement.
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.
- 7 -
<PAGE>
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 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 Delaware.
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
- 8 -
<PAGE>
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: The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Attention: Jennifer Ebright Goff
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
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.
- 9 -
<PAGE>
19. SEPARATE LIABILITIES.
---------------------
Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each series of the Trust are separate
and distinct from the assets and liabilities of each other series and that no
series shall be liable or shall be charged for any debt, obligation or liability
of any other series, whether arising under this Agreement or otherwise.
20. 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.
21. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE WINTER HARBOR FUND
By: /s/ Jennifer E. Goff
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
-----------------------------
Its: President
- 10 -
ACCOUNTING SERVICES AGREEMENT
-----------------------------
AGREEMENT dated as of September 22, 1998 between The Winter Harbor Fund, a
Delaware 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.
Without limiting the generality of the foregoing, with respect to the Trust
or each series, as applicable, Countrywide shall:
A. calculate the net asset value per share with the frequency prescribed
in each series' then-current prospectus;
<PAGE>
B. calculate each item of income, expense, deduction, credit, gain and
loss, if any, as required by the Trust and in conformance with
generally accepted accounting practice ("GAAP"), the SEC's Regulation
S-X (or any successor regulation) and the Internal Revenue Code of
1986, as amended (or any successor laws) (the "Code");
C. maintain each series' general ledger and record all income, expenses,
capital share activity and security transactions of each series;
D. calculate the yield, effective yield, tax equivalent yield and total
return for each series, and each class thereof, as applicable, and
such other measure of performance as may be agreed upon between the
parties hereto;
E. provide the Trust and such other persons as the Trust's administrator
may direct with the following reports: (i) a current security position
report, (ii) a summary report of transactions and pending maturities
(including the principal, cost, and accrued interest on each portfolio
security in maturity date order), and (iii) a current cash position
and projection report;
F. prepare and record, as of each time when the net asset value of a
series is calculated or as otherwise directed by the Trust, either (i)
a valuation of the assets of each series (unless otherwise specified
in or in accordance with this Agreement, based upon the use of outside
services normally used and contracted for this purpose by Countrywide
in the case of securities for which information and market price or
yield quotations are readily available and based upon evaluations
conducted in accordance with the Trust's instructions in the case of
all other assets), or (ii) a calculation confirming that the market
value of each series' assets does not deviate from the amortized cost
value of those assets by more than a specified percentage;
G. make such adjustments over such periods as Countrywide deems necessary
to reflect over-accruals or under-accruals of estimated expenses or
income;
H. request any necessary information from the Trust's administrator and
the Trust's transfer agent and distributor in order to prepare, and
prepare, the Trust's Form N-SAR;
- 2 -
<PAGE>
I. provide appropriate records to assist the Trust's independent
accountants and, upon approval of the Trust or the Trust's
administrator, any regulatory body in any requested review of the
Trust's books and records maintained by Countrywide;
J. prepare semi-annual financial statements and oversee the production of
the semi-annual financial statements and any related report to the
Trust's shareholders prepared by the Trust or its investment advisers;
K. file the series' semi-annual financial statements with the SEC or
ensure that the series' semi-annual financial statements are filed
with the SEC;
L. provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information with respect to investment companies;
M. provide the Trust or the Trust's administrator with the data requested
by the administrator that is required to update the Trust's
registration statement;
N. provide the Trust or independent accountants with all information
requested with respect to the preparation of the Trust's income,
excise and other tax returns;
O. prepare, execute and file all Federal income and excise tax returns
and state income and other tax returns, including any extensions or
amendments, each as agreed between the Trust and Countrywide;
P. produce quarterly compliance reports for investment advisers to the
Trust and the Board or Trustees and provide information to the Trust's
administrator, investment advisers to the Trust and other appropriate
persons with respect to questions of series compliance;
Q. determine the amount of distributions to shareholders as necessary to,
among other things, maintain the qualification of each series as a
regulated investment company under the Code, and prepare and
distribute to appropriate parties notices announcing the declaration
of dividends and other distributions to shareholders;
R. transmit to and receive from each series' transfer agent appropriate
data on a daily basis and daily reconcile shares of any and each
series outstanding and other data with the transfer agent;
- 3 -
<PAGE>
S. periodically reconcile all appropriate data with each series'
custodian;
T. verify investment trade tickets when received from an investment
adviser and maintain individual ledgers and historical tax logs for
each security; and
U. perform such other recordkeeping, reporting and other tasks as may be
specified from time to time in the procedures adopted by the Board or
Trustees or required by the 1940 Act.
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 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.
Without limiting the generality of the foregoing, with respect to the Trust
or each series, as applicable, Countrywide shall prepare and maintain, pursuant
to Rule 3la-1 under the 1940 Act (the "Rule"), the following:
A. accounts, books and other documents constituting the basis for
financial statements required to be filed pursuant to Section 30 of
the 1940 Act, as required by subsection (a) of the Rule;
B. journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of
cash and all other debits and credits, as required by subsection
(b)(1) of the Rule;
C. journals and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, as required by
subsection (b)(2) of the Rule;
- 4 -
<PAGE>
D. a record of each brokerage order given by or on behalf of the Trust
for, or in connection with, the purchase or sale of securities, and
all other portfolio purchases or sales, as required by subsections
(b)(5) and (b)(6) of the Rule;
E. a record of all options, if any, in which the Trust has any direct or
indirect interest or which the Trust has granted or guaranteed and a
record of any contractual commitments to purchase, sell, receive or
deliver any property as required by subsection (b)(7) of the Rule;
F. a monthly trial balance of all ledger accounts as required by
subsection (b)(8) of the Rule; and
G. other records required by the Rule or any successor rule or pursuant
to interpretations thereof to be kept by open-end management
investment companies.
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.
- 5 -
<PAGE>
7. FURTHER ACTIONS.
----------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
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 or any other agreement between the parties hereto,
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.
- 6 -
<PAGE>
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, 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
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 negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
- 7 -
<PAGE>
D. Countrywide agrees to indemnify and hold harmless the Trust, its
employees, agents, officers, control persons, affiliates and Trustees, against
and from any and all claims, demands, expenses, judgments, losses, charges
(including attorneys' fees), liabilities (whether with or without basis in fact
or law) and other reasonable expenses arising out of Countrywide's actions or
omissions in the performance of Countrywide's duties or obligations under this
Agreement by reason of Countrywide's, or its directors, officers, employees,
shareholders, agents, control persons, or affiliates, willful misfeasance, bad
faith, or negligence, or by reason of reckless disregard by any of such persons
of the obligations and duties of Countrywide under this Agreement.
13. 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 ninety (90) 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.
- 8 -
<PAGE>
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 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 Delaware.
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.
- 9 -
<PAGE>
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: The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Attention: Jennifer Ebright Goff
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 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.
- 10 -
<PAGE>
22. SEPARATE LIABILITIES.
---------------------
Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each series of the Trust are separate
and distinct from the assets and liabilities of each other series and that no
series shall be liable or shall be charged for any debt, obligation or liability
of any other series, whether arising under this Agreement or otherwise.
23. 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.
24. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE WINTER HARBOR FUND
By: /s/ Jennifer E. Goff
------------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
------------------------------
Its: President
- 11 -
<PAGE>
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 + .001% of Over $200,000,000
average net assets
over $200,000,000
- 12 -
CONSENT OF INDEPENDENT ACCOUNTANTS
March 1, 1999
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to the Registration Statement on Form N-1A of The Winter Harbor Fund (the
"Trust") of our report on The REvest Value Fund dated February 16, 1999 on our
audits of the financial statements and financial highlights of The REvest Value
Fund, which report is included in the Annual Report to Shareholders for the year
ended December 31, 1998. We also consent to the reference to our Firm under the
caption "Independent Accountants" in the Statement of Additional Information
relating to The REvest Value Fund in this Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of the Trust.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001059611
<NAME> The Winter Harbor Fund
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 20,717,526
<INVESTMENTS-AT-VALUE> 24,765,119
<RECEIVABLES> 55,134
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,738
<TOTAL-ASSETS> 24,823,991
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,868
<TOTAL-LIABILITIES> 93,868
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,663,004
<SHARES-COMMON-STOCK> 2,272,903
<SHARES-COMMON-PRIOR> 2,991,804
<ACCUMULATED-NII-CURRENT> 12,821
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,705
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,047,593
<NET-ASSETS> 24,730,123
<DIVIDEND-INCOME> 483,193
<INTEREST-INCOME> 305,343
<OTHER-INCOME> 0
<EXPENSES-NET> 410,528
<NET-INVESTMENT-INCOME> 378,008
<REALIZED-GAINS-CURRENT> 3,193,187
<APPREC-INCREASE-CURRENT> (5,641,998)
<NET-CHANGE-FROM-OPS> (2,070,803)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 371,064
<DISTRIBUTIONS-OF-GAINS> 2,560,610
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 175,492
<NUMBER-OF-SHARES-REDEEMED> 1,150,578
<SHARES-REINVESTED> 256,185
<NET-CHANGE-IN-ASSETS> (14,155,417)
<ACCUMULATED-NII-PRIOR> 5,877
<ACCUMULATED-GAINS-PRIOR> (625,872)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 315,903
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 431,728
<AVERAGE-NET-ASSETS> 31,590,275
<PER-SHARE-NAV-BEGIN> 13.00
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> (1.02)
<PER-SHARE-DIVIDEND> 0.15
<PER-SHARE-DISTRIBUTIONS> 1.10
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.88
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
