As filed with the Securities and Exchange Commission on July 26, 1999
Securities Act File No. 333-50315
Investment Company Act File No. 811-8751
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post Effective Amendment No. 1 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [X]
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
One Yesler Building, Suite 200
Seattle, WA 98104
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, including Area Code:
(206) 405-4100
Margaret M. Towle
Puget Sound Asset Management Co., LLC
One Yesler Building, Suite 200
Seattle, WA 98104
(Name and Address of Agent for Service)
Copy to:
John M. Loder, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment.
It is proposed that this filing will become effective (check appropriate
box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On _________________ pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] On __________________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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As filed with the Securities and Exchange
Commission on July 26, 1999
Registration No. 333-50315
File No. 811-8751
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Part A
of
Form N-1A
REGISTRATION STATEMENT
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
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<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO,
A SERIES OF PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
Puget Sound Market Neutral Portfolio is a mutual fund that seeks long-term
capital appreciation while maintaining minimal exposure to general equity market
risk.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES AND DOES NOT GUARANTEE THE ACCURACY OR
COMPLETENESS OF THIS PROSPECTUS. IT IS A CRIMINAL OFFENSE TO SUGGEST OTHERWISE.
The date of this Prospectus is ____________ , 1999
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TABLE OF CONTENTS
An Overview of the Fund...................................................
Performance...............................................................
Fees and Expenses.........................................................
Investment Objective and Principal Investment Strategies..................
Principal Risks of Investing in the Fund..................................
Management of the Fund....................................................
Institutional and Investor Shares.........................................
Pricing of Fund Shares....................................................
Dividends and Distributions...............................................
Tax Consequences..........................................................
Rule 12b-1 Fees...........................................................
Financial Highlights......................................................
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AN OVERVIEW OF THE FUND
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Plain English About
INVESTING FOR THE LONG TERM
The Fund is intended to be a long-term investment vehicle and is not designed to
provide investors with a means of speculating on short-term fluctuations in the
stock market.
Plain English About
MAIN RISK
This Prospectus describes the risks you will face as an investor in the Fund. It
is important to keep in mind one of the main axioms of investing the higher the
risk of losing money, the higher the potential reward. As you consider an
investment in the Fund, you should also take into account your personal
tolerance for share price volatility.
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THE FUND'S INVESTMENT GOAL
The Fund seeks long-term capital appreciation while maintaining minimal exposure
to general equity market risk.
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund uses a "market neutral" investment strategy, designed to produce
returns that do not depend on the stock market's direction. Market neutral
investing means that the Fund simultaneously holds two diversified portfolios of
securities:
* long portfolio of stocks identified by the Sub-Advisor(s) as undervalued;
and
* short portfolio of stocks identified by the Sub-Advisor(s) as overvalued.
By taking long and short positions in stocks with similar characteristics, the
Sub-Advisor(s) attempt to cancel out the effect of general stock market
movements on the Fund's performance. The Sub-Advisor(s) determine the size of
each long or short position by analyzing the tradeoff between the attractiveness
of each position and its impact on the risk to the portfolio. Puget Sound Asset
Management Co., LLC, the Fund's Advisor, monitors and evaluates the efforts of
the Sub-Advisor(s) in pursuing the Fund's goal.
The Fund invests in common stocks that are traded on US stock exchanges of any
market capitalization, from larger, well-established companies to smaller,
emerging growth companies.
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PRINCIPAL RISKS OF INVESTING IN THE FUND
As with all mutual funds, there is the risk that you could lose money on your
investment in the Fund. For example, the following risks could affect the value
of your investment:
* Changes in market, economic, political and other conditions could hurt
stock performance.
* The Fund's shares may lose value as a result of selling borrowed securities
("selling short")
* High portfolio turnover could result in more transactions costs for the
Fund and higher taxable gains for the Fund's shareholders
* Securities of smaller and new companies involve greater risk than investing
larger more established companies
* Poor stock selection by the Sub-Advisor(s),
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Plain English About
MARKET NEUTRAL INVESTING
There are many different styles of market neutral investing, such as long/short
equity portfolios, convertible bond hedging, fixed income hedging and risk
arbitrage.
In this Prospectus, market neutral investing refers to an equity fund that holds
two diversified portfolios: a long portfolio of stocks identified as
undervalued, held simultaneously with a short portfolio of stocks identified as
overvalued.
Plain English About
FUND EXPENSE
All mutual funds have operating expenses. These expenses, which are deducted
from a fund's gross income, are expressed as a percentage of the net assets of
the fund. The Fund pays higher investment advisory fees than some other mutual
funds. Some types of non-traditional investments, such as market neutral
strategies, are often more complex and require greater time and resources to
manage than other more traditional equity mutual funds. This additional effort
is reflected in higher investment advisory fees.
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WHO SHOULD CONSIDER INVESTING IN THE FUND
The Fund may be appropriate for you if:
* You are pursuing a long-term goal
* You are interested in adding a non-traditional investment strategy to
your current mix of stock, bond and money market funds
* You are seeking a fund that offers the potential for long-term capital
growth with minimal exposure to general equity market risk
* You understand and can bear the risks of investing in a fund that uses
a long/short equity strategy.
The Fund may not be appropriate for you if:
* You need regular income or stability of principal
* You are pursuing a short-term goal or investing emergency reserves.
PREFORMANCE
The Fund commenced operations on June 29, 1998 and therefore does not have
a full calendar year of performance.
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FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
Institutional Investor
Shares Shares
------------- --------
Shareholder fees
(fees paid directly from your investment
Maximum sales charge (load) imposed on purchases
(AS A PERCENTAGE OF OFFERING PRICE)(1)............... None 3.00%
Maximum deferred sales charge (load)
(AS A PERCENTAGE OF THE LOWER ORIGINAL PURCHASE
PRICE OR REDEMPTION PROCEEDS)........................ None None
Maximum sales charge (load) imposed on
reinvested dividends................................. None None
Redemption Fees (as a % of amount
redeemed, if applicable)(2).......................... 1.00% 1.00%
1. reduced sales charge on Investor Shares applies in some cases.
2. contingent redemption fee of 1.00% is imposed on redemptions of Fund shares
held for six months or less from the time of purchase. See "How to Sell
Shares - Contingent Redemption Fee." Redemptions by wire transfer are
subject to a wire fee (currently $5.00) that is deducted from the
redemption
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ANNUAL FUND OPERATING EXPENSES(1)
(expenses that are deducted from Fund assets)
Management Fees 2.00% 2.00%
Distribution and Service (12b-1) Fees(2)................. None 0.50%
Other Expenses........................................... % %
----- -----
Total Annual Fund Operating Expenses(3).................. % %
----- -----
Fee Reduction and/or Expense Reimbursement............... ( %) ( %)
----- -----
Net Expenses(3).......................................... % %
===== =====
- ----------
1. The Advisor has contractually agreed to reduce its fees and/or pay expenses
for each class of shares of the Fund's total annual operating expenses
(excluding interest and taxes) to the net expense amounts shown. This
contract has a one-year term, renewable at the end of each fiscal year.
2. Although the table discloses a 0.50% 12b-1 fee, the Trust's distributor has
waived some of the fees it is to receive so that the Trust only pays 12b-1
fees at an annual rate of 0.25% of the average daily net assets of the
Investor Shares. 12b-1 fees cause long-term Investor Class shareholders to
pay more than would be permitted if such fees were a front-end sales
charge.
3. Other Expenses, Total Annual Fund Operating Expenses and Net Expenses do
not include dividend expenses incurred in connection with short sales,
which are included in and reduce the investment return of the Fund.
Dividend expenses were ___% for the Fund's last fiscal year.
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Plain English About
SELLING SHORT
Selling short is selling a security that you do not own. You borrow the security
from your broker, then immediately sell it. Later, you repurchase and deliver
the security to pay back your borrowed shares to the broker. Short sales are
made because the seller anticipates a decline in the price of the security.
If the price of the stock goes down between the time your borrowed the stock and
when you repurchase it, you make money. If the price of the stock goes up
between the time that you borrowed the stock and when you repurchase it, you
lose money.
Your potential loss in short selling is unlimited. Thus, successful short
selling requires a great deal of experience, diligence and attention.
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EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
with the cost of investing in other mutual funds.
The Example 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:
Institutional Investor
Shares Shares
------------- --------
One Year
Three Years
Five Years
Ten Years
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The objective of the Fund is to seek long-term capital appreciation while
maintaining minimal exposure to general equity market risk. This objective may
be changed without shareholder approval.
In an attempt to minimize the risk associated with investing in equity
securities, the Sub-Advisor(s) uses a "market neutral" investment strategy.
Market neutral investing means that the Fund simultaneously holds two
diversified portfolios of securities: a long portfolio of stocks identified by
the Sub-Advisor(s) as undervalued and a short portfolio of stocks identified by
the Sub-Advisor(s) as overvalued. By taking long and short positions in stocks
with similar characteristics, the Fund attempts to produce returns that do not
depend on the stock market's direction.
The Sub-Advisor(s) will determine the size of each long or short position
by analyzing the tradeoff between the attractiveness of each position and its
impact on the risk to the portfolio. The Sub-Advisor(s) seeks to construct a
diversified portfolio containing both long and short positions that have minimal
net exposure to the domestic equity market. The Sub-Advisor(s) selects long and
short positions with matching risk characteristics within specific
capitalization ranges and certain other risk factors. In general, the
Sub-Advisor(s) attempts to buy highly liquid stocks for the Fund. Highly liquid
stocks are those that trade with great frequency.
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The Fund invests in common stocks of domestic companies of any market
capitalization, from larger well-established companies to smaller, emerging
growth companies. The Fund defines large cap as companies with a market value
exceeding $5 billion. Mid cap companies are those with a market value between $1
billion and $5 billion. Small cap companies are those with a market value less
than $1 billion. The Sub-Advisor(s) screens a large universe of stocks to find
the 1,000 most liquid common stocks that are publicly traded in the United
States.
SHORT SELLING
The securities in the Fund's short portfolio are "sold short." Selling
short is selling a security that the Fund does not own. The Fund borrows the
security from a broker, then immediately sells it. Later, the Fund repurchases
the security and delivers it to the broker as repayment for the borrowed shares.
Short sales are made when the Sub-Advisor(s) anticipates a relative decline in
the price of a security held long. If the price of the stock goes down between
the time the Fund borrowed the stocks and repurchased them, the Fund will make
money. However, if the price of the stock goes up between the time the Fund
borrowed the stocks and repurchased them, the Fund will lose money. Successful
short selling requires a great deal of experience, diligence and attention.
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Plain English About
VOLATILITY
One of the most common measures of risk in any financial asset class is the
volatility of its total returns. Volatility risk, quite simply, refers to the
fact that a diversified portfolio may fluctuate in value and show a loss during
any interim period., even if it shows a gain over the long term.
One way to reduce the volatility risk is to create a long portfolio of
attractive stocks and a short portfolio of unattractive stocks in which the
overall volatility of returns is low.
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VOLATILITY
Part of the Fund's goal is to maintain minimal exposure to volatility of
total returns. Volatility is normally extremely high for a diversified portfolio
of common stocks when measured over short periods. Creating a long portfolio of
attractive stocks and a short portfolio of unattractive stocks has the potential
to reduce the stock prices, the following table shows the best, worst and
average annual total returns (dividend income plus changes in market value) for
the U.S. stock market over various periods as measured by the Standard & Poor's
500 Composite Stock Price Index ("S&P 500 Index"). The S&P 500 Index is a widely
recognized unmanaged index of U.S. stock market performance. Note that the
returns shown for the Index do not include the fees and expenses that a managed
portfolio would normally incur.
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S&P 500 INDEX AVERAGE ANNUAL RETURNS (1928-1998)
1 Year 5 Years 10 Years 20 Years
------ ------- -------- --------
Best
Worst
Average
The table covers all the 1-, 5-, 10- and 20-year periods from 1928 through 1998.
For example, while the average annual return on stocks for all the 5-year
periods was XX.X%, average annual returns for the 5-year periods ranged from
XX.X% (from 19XX through 19XX), to XX.X% (from 19XX through 19XX). These average
returns reflect past performance of the stocks that were then included in the
S&P 500 Index and should not be regarded as an indication of future returns from
either the stock market as a whole or the Fund in particular.
Under normal market conditions, the Fund will be at least 90% invested in
stocks. However, the Fund may temporarily depart from its principal investment
strategies by making short-term investments in cash equivalents in response to
adverse market, economic, political or other conditions. Making such investments
may result in the Fund not achieving its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The principal risks of investing in the Fund that may adversely affect the
Fund's net asset value or total return are discussed above in "Principal Risks
of Investing in the Fund." These risks are discussed in more detail below.
INVESTMENT RISK. In general, during periods of high political or economic
instability, equity investments may lose some of their appeal for investors.
This could result in loss of value for the Fund, even though the Fund seeks to
be less volatile than many equity funds. However, if the Fund holds long
positions in stocks that underperform the market and short positions in stocks
that outperform the market, then the losses of the Fund may exceed those of
other stock mutual funds.
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SHORT SALE RISK. The Fund's short portfolio represents stocks that the Fund
has borrowed from their owners, and then sold to other investors. The Fund
remains obligated to return the borrowed stocks to their owners. To do this, the
Fund will have to purchase the borrowed stocks back at some time in the future
and pay whatever the market price for those stocks may then be. If the price of
those stocks has gone up since the Fund borrowed the stocks and sold them, the
Fund will lose money on the investment. Although the Fund's gain is limited to
the amount for which it sold the borrowed security, its potential loss is
unlimited. A mutual fund that engages in short selling is more risky than other
equity mutual funds.
PORTFOLIO TURNOVER RISK. In general, the Sub-Advisor(s) does not consider
the level of portfolio turnover when deciding which securities to buy, sell and
sell short. The rate of the Fund's portfolio turnover may vary significantly
from time to time depending on the volatility of economic and market conditions.
Although the rate of portfolio turnover is difficult to predict, under normal
circumstances the Fund expects an annual portfolio turnover rate of each of the
long and short portfolios not to exceed 350%. This expected aggregate annual
portfolio turnover rate of 700% for the Fund is higher than the portfolio
turnover rate for many other mutual funds. A high portfolio turnover rate has
the potential to increase the taxes payable by the Fund's shareholders. A high
portfolio turnover rate may also lead to higher transaction costs, which could
negatively affect the Fund's performance.
EQUITY SECURITIES. In general, equity securities are more volatile than
fixed-income securities. The prices of equity securities will rise and fall in
response to events that affect entire financial markets or industries (changes
in inflation or consumer demand, for example) and to events that affect
particular companies (news about the success or failure of a new product, for
example.)
GROWTH STOCKS AND VALUE STOCKS. The prices of growth stocks may be more
sensitive to changes in current or expected earnings than the prices of other
stocks. The price of value stocks may fall, or simply may not increase very
much, if the market does not agree with the Sub-Advisor's view of the value of
the stock.
MARKET CAPITALIZATION. The stocks of large capitalization companies do not
always have as much growth potential as smaller and medium capitalization
issuers.
10
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Plain English About
LARGE CAP, MID CAP AND SMALL CAP STOCKS
Stocks of publicly traded companies - and mutual funds that hold these stocks -
can be classified by the companies' market value or capitalization. The Fund
defines large cap as companies with a market value exceeding $5 billion. Mid cap
companies are those with a market value between $1 billion and $5 billion. Small
cap companies are those with a market value less than $1 billion.
Plain English About
THE FUND'S SUB-ADVISER
FAMCO provides investment advisory services to institutional clients. As of June
30, 1999, FAMCO managed over $4 billion in assets. The individual who manages
the Fund is John L. Dorian, Chief Investment Officer-Equities of FAMCO. Mr.
Dorian has 17 years experience managing investment portfolios and 10 years
experience managing assets using a market neutral strategy. Mr. Dorian has a
B.S., M.S. and M.B.A. from Florida State University, Tallahassee, Florida.
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SMALLER COMPANIES RISK. Investment in smaller companies can be speculative
and volatile and involve greater risks than are customarily associated with
larger companies. Many small companies are more vulnerable than larger companies
to adverse business or economic developments. They may have limited product
lines, markets or financial resources. New and improved products or methods of
development may have a substantial impact on the earnings and revenues of such
companies. Any such positive or negative developments could have a corresponding
positive or negative impact on the value of their shares.
YEAR 2000 RISK. The Fund could be adversely affected if the computer
systems used by the Advisor or Sub-Advisor(s) and other service providers, or by
companies in which the Fund invests, do not properly process and calculate
information related to dates beginning January 1, 2000. This is commonly known
as the "Year 2000 Problem." This situation may negatively affect the companies
in which the Fund invests and by extension the value of the Fund's shares. The
Fund's service providers are taking steps to address their Year 2000 risk
issues, but there may still be some risk of adverse effects.
MANAGEMENT OF THE FUND
THE ADVISOR
Puget Sound Asset Management Co., LLC, organized in 1998, is the Advisor to
the Fund. The Advisor's address is One Yesler Building, Suite 200, Seattle,
Washington 98104. The Advisor oversees the management of the Fund's investments
by the Sub-Advisor(s). The Advisor monitors and evaluates the Sub-Advisor(s) to
help assure that the Sub-Advisor(s) is managing the Fund consistently with the
Fund's investment objectives, goals, and restrictions and applicable laws and
guidelines. The Advisor does not, however, determine what investments will be
purchased or sold for the Fund. For its services the Fund pays the Advisor a
monthly management fee based upon the Fund's average daily net assets at the
rate of 2.00% annually, subject to reduction as described under "Fund Expenses"
below.
THE SUB-ADVISOR
Fiduciary Asset Management Co., organized in 1994, is the Sub-Advisor to
the Fund. The Sub-Advisor's address is 8112 Maryland Avenue, Suite 310, Clayton,
MO. The Sub-Advisor manages the Fund's investments. The Sub-Advisor currently
manages assets of approximately $4 billion for institutional clients. For its
services the Advisor pays the Sub-Advisor a monthly management fee based upon
the Fund's average daily net assets at the rate of 1.50% annually.
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PORTFOLIO MANAGER
John L. Dorian is responsible for the day-to-day management of the Fund and
has been so since the Fund's inception. Mr. Dorian has served as Chief
Investment Officer-Equities of the Sub-Advisor since April 1995. From April 1990
to April 1995, Mr. Dorian was a Managing Director-Equity Portfolio Manager at
First Quadrant Corp. Mr. Dorian has 18 years experience managing investment
portfolios and 11 years experience managing assets using a market neutral
strategy.
FUND EXPENSES
The Advisor has contractually agreed to reduce its advisory fees and pay
other Fund expenses to the extent necessary to limit total operations expenses
of the Fund's classes (exclusive of brokerage costs, interest, taxes, dividends
payable with respect to securities sold short and extraordinary expenses) to the
annual rate of X.XX% of the average daily net assets of the Fund's Institutional
Shares and X.XX% of the average daily net assets of the Fund's Investor Shares.
Each class is obligated to pay the Advisor such class's deferred amount in
future years, if any, when such class's expenses fall below the stated
percentage rate, but only to the extent that such payment would not cause such
class's expenses in any such future year to exceed the stated percentage rate,
and provided that such class is not obligated to pay the deferred amount for any
fiscal year more than three years after the end of the fiscal year in which they
were incurred.
The Trust has applied for an exemptive order from the SEC to permit PSAM,
subject to the approval of the Trust's Board of Trustees and certain other
conditions, to enter into sub-advisory agreements with sub-advisors other than
the current Sub-Advisor of the Fund without obtaining shareholder approval. The
exemptive request also seeks to permit, without obtaining shareholder approval,
the terms of an existing sub-advisory agreement to be continued after events
that would otherwise cause an automatic termination of a sub-advisory agreement,
if such changes or continuation are approved by the Trust's Board of Trustees.
There is no assurance that the SEC will issue the exemptive order. This
Prospectus would be revised and the shareholders notified if the Sub-Advisor of
the Fund is changed or a new Sub-Advisor is added.
Once the Fund has multiple Sub-Advisors, the Advisor will monitor and
evaluate each Sub-Advisor to help assure that it is managing its segment of the
Fund consistently with the Fund's investment objective and restrictions and
applicable laws and guidelines. Each Sub-Advisor will manage its segment of the
Fund independently from the others. Consequently, the same security may be held
in the long portfolio or sold short in the short portfolio of two different
segments of the Fund or may be acquired for the long portfolio or sold short in
the short portfolio of one segment of the Fund at a time when the Sub-Advisor of
another segment of the Fund deems it appropriate to dispose of the security from
the long portfolio or close the short position in such security in the short
portfolio of such other segment. The same security may also be held in the long
portfolio of one segment of the Fund and sold short in the short portfolio of
another segment of the Fund. Because each Sub-Advisor will direct the trading
for its own segment of the Fund, and will not aggregate its transactions with
those of the other Sub-Advisor(s), the Fund may incur higher brokerage costs
than would be the case if a single advisor were managing the entire Fund.
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INSTITUTIONAL AND INVESTOR SHARES
The Fund offers two classes of shares to investors. The two classes of
shares are Institutional Shares and Investor Shares. While each class invests in
the same portfolio of securities, the classes have separate sales charges, and
distribution and shareholder servicing fee structures and different investment
minimums. Both classes are subject to a contingent redemption fee. Because of
the different expense structures, each class of shares generally will have
different net asset values and dividends.
HOW TO BUY SHARES
The Fund can reject any purchase request, including those regarded as
disruptive to management of the Fund's portfolio. The Fund also may stop
offering shares or change the terms of the offering of its shares at any time.
INSTITUTIONAL SHARES. Institutional Shares may be purchased by individuals,
endowments, foundations, Taft-Hartley plans and plan sponsors of 401(a), 401(k),
457 and 403(b) plans. At the discretion of the Advisor, certain other entities
may be permitted to purchase Institutional Shares. Institutional Shares are sold
without any initial or deferred sales charges and therefore are offered to the
public at net asset value and are not subject to any ongoing distribution
expenses or shareholder servicing fees. You may open an Institutional Shares
account with at least $1 million and add to your account at any time with
$10,000 or more. The minimum investment requirements may be waived from time to
time by the Advisor.
INVESTOR SHARES. Investor shares may be purchased by individuals, financial
institutions, other financial intermediaries and certain individual retirement
accounts. You may open an Investor Shares account with at least $2,500 and add
to your account at any time with $250 or more. You may open an Investor Shares
retirement plan account or an Investor Shares custodial account for minors with
at least $1,000 and add to your account at any time with $250 or more. After you
have opened your Investors Shares account, you may make subsequent monthly
investments with $50 or more through the Automatic Investment Plan. The minimum
investment requirements may be waived from time to time by the Advisor.
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The Public Offering price of Investor Shares is the net asset value of a
Fund share plus a front-end sales charge. The sales charge declines with the
size of your purchase, as shown below:
AS A % OF AS A % OF YOUR
INVESTMENT OFFERING PRICE INVESTMENT
- ---------- -------------- --------------
Up to $100,000 3.00 3.09
$100,000 but less than $250,000 2.50 2.56
$250,000 but less than $500,000 2.00 2.04
$500,000 but less than $1,000,000 1.00 1.01
$1,000,000 or more 0.00 0.00
You may qualify for a reduced sales charge on the purchase of Investor
Shares such as for amounts redeemed from other mutual funds, in connection with
your execution of a letter of intent acceptable to the Fund and pursuant to
rights of accumulation. Also, certain financial intermediary firms, retirement
plans and institutions, as well as persons affiliated with the Advisor and other
Fund officials and Fund agents may be eligible to purchase Investor Shares at
net asset value. For more information, please call Toll Free: 1-877-77-PUGET
(1-877-777-8438).
Investor Shares are also subject to an annual distribution fee of up to
0.50% (currently this fee has been voluntarily reduced by the Distributor to
0.25%) of average daily net assets attributable to Investors Shares and an
annual shareholder servicing fee of up to 0.25% of average daily net assets
attributable to Investor Shares.
INITIAL AND SUBSEQUENT PURCHASES
Your initial purchase of Fund shares and subsequent purchases may be made
by check or wire. All purchases by check must be in U.S. dollars. Third party
checks and cash will not be accepted. A charge may be imposed if your check does
not clear. YOU MUST BE SURE TO SPECIFY WHICH CLASS OF SHARES YOUR ARE PURCHASING
WHEN YOU PLACE YOUR PURCHASE ORDER. The Fund will not issue share certificates.
The Fund reserves the right to reject any purchase in whole or in part. Although
it does not anticipate that it will do so, the Fund reserves the right to
suspend or change the terms of the offering of its shares.
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BY CHECK
If you are making an initial investment in the Fund, simply complete the
Application Form and mail it with a check (made payable to "Puget Sound Market
Neutral Portfolio") to:
Puget Sound Market Neutral Portfolio
c/o National Financial Data Services
P.O. Box 219407
Kansas City, MO 64121-9407
If you wish to send your Application Form and check via an overnight
delivery service (such as FedEx), delivery cannot be made to a post office box.
In that case, you should use the following address:
Puget Sound Market Neutral Portfolio
c/o National Financial Data Services
330 West 9th Street
Kansas City MO 64105
Upon acceptance of your order, the Fund's shareholder servicing agent will
open an account for you, apply the payment to the purchase of full and
fractional Fund shares and mail a statement of account confirming the
transaction.
If you are making a subsequent purchase, a stub is attached to the account
statement you will receive after each transaction. Detach the stub from the
statement and mail it together with a check made payable to " Puget Sound Market
Neutral Portfolio" to the Transfer Agent, National Financial Data Services, 330
West 9th Street, Kansas City, MO 64105. Your account number should be written on
the check.
BY WIRE
Subsequent investments can be made by federal funds wire. To purchase
shares by wire, call, toll free, 1-877-77-PUGET (1-877-777-8438) to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
15
<PAGE>
BROKERS AND AGENTS
You may buy and sell shares of the Fund through certain brokers (and their
agents) that have made arrangements with the Fund to sell its shares. When you
place your order with such a broker or its authorized agent, your order is
treated as if you had placed it directly with the Fund's Transfer Agent, and you
will pay or receive the next price calculated by the Fund after your order is
received by such broker or other authorized agent in proper form. The broker (or
agent) holds your shares in an omnibus account in the broker's (or agent's)
name, and the broker (or agent) maintains your individual ownership records. The
Fund or the Advisor may pay the broker (or its agent) for maintaining these
records as well as providing other shareholder services. The broker (or its
agent) may charge you a fee for handling your order. The broker (or agent) is
responsible for processing your order correctly and promptly, keeping you
advised regarding the status of your individual account, confirming your
prospectus.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Fund offers an Automatic Investment Plan for
Investor shares. Under this Plan, after your initial investment, you authorize
the Fund to withdraw from your personal checking account each month an amount
that you wish to invest, which must be at least $50. If you wish to enroll in
this Plan, complete the appropriate section in the Account Application. The Fund
may terminate or modify this privilege at any time. You may terminate your
participation in the Plan at any time by notifying the Transfer Agent.
RETIREMENT PLANS
The Fund's shares may be purchased by all types of tax-deferred retirement
plans. The Fund makes available retirement plan forms for IRAs.
16
<PAGE>
HOW TO SELL SHARES
You may sell (redeem) your Fund shares on any day the Fund and the NYSE are
open for business either directly to the Fund or through your investment
representative.
You may redeem your shares by simply sending a written request to the
Transfer Agent. You should give the name of the Fund, your account number and
state whether you want all or some of your shares redeemed. The letter should be
signed by all of the shareholders whose names appear in the account
registration. You should send your redemption request to:
Puget Sound Market Neutral Portfolio
c/o National Financial Data Services
P.O. Box 219407
Kansas City, MO 64121-9407
To protect the Fund and its shareholders, if you are redeeming shares worth
more than $10,000, or requesting that the proceeds check be made out to someone
other than the registered owners, or be sent to an address other than your
address of record, a signature guarantee is required. Signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution."
These include banks, broker-dealers, credit unions and savings institutions. A
broker-dealer guaranteeing signatures must be a member of a clearing corporation
or maintain net capital of at least $100,000. Credit unions must be authorized
to issue signature guarantees. Signature guarantees will be accepted from any
eligible guarantor institution which participates in a signature guarantee
program. A notary public is not an acceptable guarantor.
If you complete the Redemption by Telephone portion of the Account
Application, you may redeem all or some of your shares by calling the Transfer
Agent toll free: 1-877-77-PUGET (1-877-777-8438) before the close of trading on
the NYSE. This is normally 4:00 p.m., Eastern time. All orders received after
the close of trading will be processed with the next day's net asset value.
Redemption proceeds will be mailed on the next business day to the address that
appears on the Transfer Agent's records. If you request, redemption proceeds
will be wired on the next business day to the bank account you designated on the
Account Application. The minimum amount that may be wired is $1,000. Wire
charges, if any, will be deducted from your redemption proceeds. Telephone
redemptions cannot be made if you notify the Transfer Agent of a change of
address within 30 days before the redemption request. If you have a retirement
account, you may not redeem shares by telephone.
17
<PAGE>
When you establish telephone privileges, you are authorizing the Fund and
the Transfer Agent to act upon the telephone instructions of the person or
persons you have designated in your Account Application. Redemption proceeds
will be transferred to the bank account you have designated on your Account
Application.
Before executing an instruction received by telephone, the Fund and the
Transfer Agent will use reasonable procedures to confirm that the telephone
instructions are genuine. These procedures will include recording the telephone
call and asking the caller for a form of personal identification. If the Fund
and the Transfer Agent follow these reasonable procedures, they will not be
liable for any loss, expense, or cost arising out of any telephone redemption
request that is reasonably believed to be genuine. This includes any fraudulent
or unauthorized request. The Fund may change, modify or terminate these
privileges at any time upon at least 60 days' notice to shareholders.
You may request telephone redemption privileges after your account is
opened by calling the Transfer Agent toll free: 1-877-77-PUGET (1-877-777-8438)
for instructions.
You may have difficulties in making a telephone exchange or redemption
during periods of abnormal market activity. If this occurs, you may make your
exchange or redemption request in writing.
Payment of your redemption proceeds will be made promptly, but not later
than seven days after the receipt of your written request in proper form. If you
made your initial investment by wire, payment of your redemption proceeds for
those shares will not be made until one business day after your completed
Account Application is received by the Fund. If you did not purchase your shares
with a certified check or wire, the Fund may delay payment of your redemption
proceeds for up to 10 days from date of purchase or until your check has
cleared, whichever occurs first.
The Fund may redeem the shares in your account if the value of your account
is less than $2,500 as a retirement plan or Uniform Gifts or Transfers to Minors
Act accounts. You will be notified that the value of your account is less than
$2,500 before the Fund makes an involuntary redemption. You will then have 60
days in which to make an additional investment to bring the value of your
account to at least $2,500 before the Fund takes any action.
The Fund has the right to pay redemption proceeds to you in whole or in
part by a distribution of securities from the Fund's portfolio. It is not
expected that the Fund would do so except in unusual circumstances.
18
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
As another convenience, you may redeem your Fund shares through the
Systematic Withdrawal Plan. If you elect this method of redemption, the Fund
will send you or any person you designate a check in the minimum amount of $100.
You may choose to receive a check each month or on a calendar quarterly,
semi-annual and annual basis. Your Fund account must have a value of at least
$5,000 in order to participate in this Plan. This Plan may be terminated at any
time by the Fund. You may also elect to terminate your participation in this
Plan at any time by notifying the Transfer Agent.
A withdrawal under the Plan involves a redemption of shares and may result
in a gain or loss for federal income tax purposes. In addition, if the amount
withdrawn exceeds the dividends credited to your account, the account ultimately
may be depleted.
CONTINGENT REDEMPTION FEE
The Fund is intended for long-term investors. Short-term "market timers"
who engage in frequent purchases and redemptions can disrupt the Fund's
investment program and create additional transaction costs that are borne by all
shareholders. For these reasons, the Fund assesses a redemption fee in the
amount of 1.00% on redemptions of Fund shares held for six months or less from
the time of purchase.
The contingent redemption fee will be paid to the Fund to help offset
brokerage and other Fund costs associated with redemptions. The Fund will use
the "First-in, First-out" (FIFO) method to determine the holding period of an
investor's shares. Under the method, the date of the redemption will be compared
with the earliest purchase date of Fund shares held in the account. If this
holding period is six months or less, the contingent redemption fee will be
assessed. Redemption fees are not sales loads or contingent deferred sales
loads.
The contingent redemption fee does not apply to any shares purchased
through the reinvestment of dividends.
PRICING OF FUND SHARES
For each class, the price of the Fund's shares is based on its net asset
value. This is done by dividing the Fund's assets, minus its liabilities, by the
number of shares outstanding. The Fund's assets are the market value of
securities held in its portfolio, plus any cash and other assets. The Fund's
liabilities are fees and expenses owed by the Fund. The number of Fund shares
outstanding is the amount of shares which have been issued to shareholders. The
price you will pay to buy Fund shares is the net asset value next calculated
after your order is received by the Transfer Agent or an authorized
broker-dealer of the Fund or any such broker-dealer's authorized designee with
complete information and meeting all the requirements discussed in this
19
<PAGE>
Prospectus, plus any applicable sales charge. The amount you will receive when
you sell your Fund shares is the net asset value next calculated after your
order is received by the Transfer Agent with complete information and meeting
all of the requirements discussed in this Prospectus, minus any applicable
redemption fee.
The net asset value of each class of shares is determined as of the close
of regular trading on the NYSE. This is normally 4:00 p.m., Eastern time. Fund
shares will not be priced on days that the NYSE is closed for trading (including
certain U.S. holidays).
DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if any, at
least annually, typically after year end. The Fund will make another
distribution of any additional undistributed capital gains earned during the
12-month period ended October 31 on or about December 31. All distributions will
be reinvested in shares of the Fund unless you request in writing to receive
your distributions in cash.
TAX CONSEQUENCES
The Fund intends to make distributions of dividends and capital gains.
Dividends are taxable to you as ordinary income. The rate you pay on capital
gain distributions will depend on how long the Fund held the securities that
generated the gains, not on how long you owned your Fund shares. You will be
taxed in the same manner whether you receive your dividends and capital gain
distributions in cash or reinvest them in additional Fund shares.
If you sell your Fund shares, it is considered a taxable event for you even
if you purchase shares of another fund. Depending on the purchase price and the
sale price of the shares you sell, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transaction.
RULE 12b-1 FEES
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under the Plan, the Fund is authorized to pay
the principal distributor of the Fund's shares a fee for the sale and
distribution of Investor Shares. The maximum annual amount of the fee authorized
is 0.50% of the Fund's average daily net assets attributable to Investor Shares.
The principal distributor of the Fund's shares has voluntarily agreed to reduce
the fee it collects under the Plan to an annual rate of 0.25% of the Fund's
average daily net assets attributable to Investor Shares. Because these fees are
paid out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment in Investor Shares and may cost you more
than paying other types of sales charges.
20
<PAGE>
In addition, the Fund has adopted a Shareholder Servicing Plan with respect
to Investor Shares. Under the Plan, the Fund is authorized to pay an
intermediary or agent ("Servicing Agent") an annual fee up to 0.25% of the
Fund's average daily net asset attributable to Investor Shares. Payments are
made to Servicing Agents for certain additional services they provide to
Investor Shares' shareholders.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past year. 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 Deloitte & Touche LLP, independent Certified
Public Accountants, whose report, along with the Fund's financial statements,
are included in the annual report, which is available upon request.
21
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO,
A SERIES OF PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST (THE "TRUST")
For investors who want more information about the Fund, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
Prospectus.
You can get free copies of the Fund's annual and semi-annual reports and the
SAI, request other information and discuss your questions about the Fund by
contacting the Fund at:
Puget Sound Alternative Investment Series Trust
One Yesler Building, Suite 200
Seattle, WA 98104
Telephone: 1-800-877-77-PUGET
You can review and copy information about the Fund, including the Fund's reports
and SAI, at the Public Reference Room of the Securities and Exchange Commission
in Washington, D.C. You can obtain information on the operation of the Public
Reference Room by calling 1-800-SEC-0330. You can get copies of such
information:
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009, or
* For a fee, by calling 1-800-SEC-0330, or
* Free of charge from the Commission's Internet website at
http://www.sec.gov.
(The Trust's SEC Investment Company Act
file number is 811-8751)
<PAGE>
As filed with the Securities and Exchange
Commission on July 26, 1999
Registration No. 333-50315
File No. 811-8751
================================================================================
Part B
of
Form N-1A
REGISTRATION STATEMENT
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
================================================================================
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1999
PUGET SOUND MARKET NEUTRAL PORTFOLIO
A SERIES OF
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
ONE YESLER BUILDING, SUITE 200
SEATTLE, WA 98104
(877) 77-PUGET
(877) 777-8438
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the prospectus of the Puget Sound Market
Neutral Portfolio (the "Fund"). Certain disclosure has been incorporated by
reference from the Trust's annual report. Puget Sound Asset Management Co., LLC
(the "Advisor") is the advisor to the Fund. Fiduciary Asset Management Co. (the
"Sub-Advisor") is the sub-advisor to the Fund. Free copies of the Fund's
Prospectus dated _____________, 1999 and Annual Report are available by calling
the telephone numbers listed above.
TABLE OF CONTENTS
The Trust...................................................................B-
Investment Objective and Policies...........................................B-
Investment Restrictions.....................................................B-
Distributions and Tax Information...........................................B-
Trustees and Executive Officers.............................................B-
The Fund's Investment Advisor...............................................B-
The Fund's Administrator....................................................B-
The Fund's Distributor......................................................B-
Execution of Portfolio Transactions.........................................B-
Portfolio Turnover..........................................................B-
Additional Purchase And Redemption Information..............................B-
Determination of Share Price................................................B-
Performance Information.....................................................B-
General Information.........................................................B-
Financial Statements........................................................B-
Appendix....................................................................B-
B-1
<PAGE>
THE TRUST
Puget Sound Alternative Investment Series Trust (the "Trust") is an
open-end, management investment company organized on April 14, 1998 as a
Massachusetts business trust. The Trust may consist of various series which
represent separate investment portfolios. Currently, the Trust only has one
series, the Fund.
The Trust is registered with the SEC as a management investment company.
Such a registration does not involve supervision of the management or policies
of the Fund. The Prospectus of the Fund and this SAI omit certain of the
information contained in the Registration Statement filed with the SEC. Copies
of such information may be obtained from the SEC upon payment of the prescribed
fee.
INVESTMENT OBJECTIVE AND POLICIES
The Puget Sound Market Neutral Portfolio is a mutual fund with the
investment objective of seeking long-term capital appreciation while maintaining
minimal exposure to general equity market risk. The Fund is diversified, which
under applicable federal law means that as to 75% of its total assets, not more
than 5% may be invested in the securities of a single issuer and that it may
hold no more than 10% of the voting securities of a single issuer. The following
discussion supplements the discussion of the Fund's investment objectives and
policies as set forth in the Prospectus. There can be no assurance the objective
of the Fund will be attained.
SHORT SALES. The Fund will seek to realize additional gains through short
sales. Short sales are transactions in which the Fund sells a security that it
does not own, in anticipation of a decline in the value of that security
relative to the long positions held by the Fund. To complete such a transaction,
the Fund must borrow the security to make delivery to the buyer. The Fund is
then obligated to replace the security borrowed by purchasing it in the market
at or prior to the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Fund. Until the
security is replaced, the Fund is required to repay the lender any dividends or
interest that accrue during the period of the loan. To borrow the security, the
Fund may also be required to pay a premium, which would increase the cost of the
security sold. The net proceeds of the short sale will be retained by the broker
(or by the Trust's custodian in a special custody account),to the extent
necessary to meet margin requirements, until the short position is closed out.
The Fund will also incur transaction costs in effecting short sales.
B-2
<PAGE>
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of loss increased, by the amount of the premium,
dividends, interest, or expense the Fund may be required to pay in connection
with a short sale. An increase in the value of a security sold short by the Fund
over the price at which it was sold short will result in a loss to the Fund.
There can be no assurance that the Fund will be able to close out the position
at any particular time or at any acceptable price.
The staff of the Securities and Exchange Commission is of the opinion that
a short sale involves the creation of a senior security and is, therefore,
subject to the limitations of Section 18 of the Investment Company Act of 1940,
as amended (the "1940 Act"). The staff has taken the position that in order to
comply with the provisions of Section 18, the Fund must segregate liquid assets
equal to the difference between: (a) the market value of the securities sold
short at the time they were sold short, and (b) any cash or securities required
to be deposited as collateral with the broker or custodian in connection with
the short sale (not including the proceeds from the short sale). In addition,
until the Fund replaces the borrowed security, it must daily maintain the
segregated assets at such a level that the amount deposited in it plus the
amount deposited with the broker as collateral will equal the current market
value of the securities sold short. Depending on the arrangement made with the
broker or custodians, the Fund may not receive any payments (including interest)
on collateral deposited with such brokers or custodians.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under
such agreements, the Fund buys a security from a seller and the seller agrees to
repurchase the security it at a mutually agreed upon time and price. The
repurchase price may be higher than the purchase price, the difference being
income to the Fund, or the purchase and repurchase prices may be the same, with
interest at a stated rate due to the Fund together with the repurchase price on
repurchase. In either case, the income to the Fund is unrelated to the interest
rate on the U.S. Government security itself. Such repurchase agreements will be
made only with banks with assets of $500 million or more that are insured by the
Federal Deposit Insurance Corporation or with Government securities dealers
recognized by the Federal Reserve Board and registered as broker-dealers with
the Securities and Exchange Commission ("SEC") or exempt from such registration.
The Fund will generally enter into repurchase agreements of short durations,
from overnight to one week, although the underlying securities generally have
longer maturities. The Fund may not enter into a repurchase agreement with more
than seven days to maturity if, as a result, more than 15% of the value of its
net assets would be invested in illiquid securities including such repurchase
agreements.
B-3
<PAGE>
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan
from the Fund to the seller of the U.S. Government security subject to the
repurchase agreement. It is not clear whether a court would consider the U.S.
Government security acquired by the Fund subject to a repurchase agreement as
being owned by the Fund or as being collateral for a loan by the Fund to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the U.S. Government security before its repurchase
under a repurchase agreement, the Fund may encounter delays and incur costs
before being able to sell the security. Delays may involve loss of interest or a
decline in price of the U.S. Government security. If a court characterizes the
transaction as a loan and the Fund has not perfected a security interest in the
U.S. Government security, the Fund may be required to return the security to the
seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, the Fund would be at the risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Fund, the Advisor seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
other party, in this case the seller of the U.S. Government security.
ILLIQUID SECURITIES. The Fund may invest up to 15% of the value of its net
assets in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. The Advisor will monitor the
amount of illiquid securities in the Fund's portfolio, under the supervision of
the Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to sell restricted or other illiquid securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemption requests within
seven days. The Fund might also have to register such restricted securities in
order to sell them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
B-4
<PAGE>
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
INVESTMENT COMPANIES. The Fund may under certain circumstances invest a
portion of its assets in other investment companies, including money market
funds. An investment in a mutual fund will involve payment by the Fund of its
pro rata share of advisory and administrative fees charged by such fund.
SHORT-TERM INVESTMENTS
The Fund may invest in any of the following securities and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Fund
may hold certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar-denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully insured
by the U.S. Government.
In addition to buying certificates of deposit and bankers' acceptances, the
Fund also may make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
B-5
<PAGE>
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Fund may invest a portion of its
assets in commercial paper and short-term notes. Commercial paper consists of
unsecured promissory notes issued by corporations. Commercial paper and
short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at the
time of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's, or
similarly rated by another nationally recognized statistical rating organization
or, if unrated, will be determined by the Advisor to be of comparable quality.
These rating symbols are described in the Appendix.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the
Fund and (unless otherwise noted) are fundamental and cannot be changed without
the affirmative vote of a majority of the Fund's outstanding voting securities
as defined in the 1940 Act. The Fund may not:
1. Borrow money in excess of 33 1/3% of the value (taken at the lower of
cost or current value) of the Fund's total assets (not including the amount
borrowed) at the time the borrowing is made. Short sales and related borrowings
of securities are not subject to this restriction.
2. Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws.
3. Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by interests in
real estate, and securities which represent interests in real estate, and it may
acquire and dispose of real estate or interests in real estate acquired through
the exercise of its rights as a holder of debt obligations secured by real
estate or interests therein.
4. Purchase securities (other than securities of the U.S. government, its
agencies or instrumentalities) if, as a result of such purchase, more than 25%
of the Fund's total assets would be invested in any one industry.
5. Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell stock index and other financial futures contracts and
options, and may enter into swap agreements, foreign exchange contracts and
other financial transactions not involving physical commodities.
6. Make loans, except by purchase of debt obligations, by entering into
repurchase agreements, or by lending its portfolio securities.
B-6
<PAGE>
7. Issue any class of securities which is senior to the Fund's shares of
beneficial interest. (For the purpose of this restriction none of the following
is deemed to be a senior security: any borrowing permitted by restriction (1)
above; any pledge or other encumbrance of assets; short sales; any collateral
arrangements with respect to short sales, swaps, options, future contracts and
options on future contracts and with respect to initial and variation margin;
and the purchase or sale of options, future contracts or options on future
contracts.)
Notwithstanding the latitude permitted by Restrictions (1) and (5) above
and Restrictions (g) and (h) below, the Fund has no current intention of (a)
borrowing money except (i) as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might otherwise require the
untimely disposition of portfolio investments or (ii) for extraordinary or
emergency purposes or (b) purchasing interest rate futures.
The Fund observes the following policies, which are not deemed fundamental
and may be changed without shareholder vote. The Fund may not:
a. Invest in warrants or rights (other than warrants or rights acquired by
the Fund as a part of a unit or attached to securities at the time of purchase).
b. Write, purchase or sell options on particular securities (as opposed to
market indices).
c. Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
d. Make investments for the purpose of exercising control of a company's
management.
e. Purchase or sell futures contracts or options thereon.
f. Invest in (i) securities which at the time of investment are not readily
marketable, (ii) securities restricted as to resale (excluding securities
determined by the trustees of the Trust (the "Trustees") (or the person
designated by the Trustees to make such determinations) to be readily
marketable) and (iii) repurchase agreements maturing in more than seven days,
if, as a result, more than 15% of the Fund's net assets (taken at current value)
would then be invested in (i), (ii) and (iii) above.
g. Pledge, hypothecate, mortgage or otherwise encumber any of its assets,
except that the Fund may pledge assets having a value not exceeding 10% of its
total assets (taken at cost) to secure borrowings permitted by fundamental
restriction (1) above. (For the purposes of this restriction, collateral
arrangements with respect to options, short sales, stock index, interest rate,
currency or other futures, options on futures contracts and collateral
arrangements with respect to initial and variation margin are not deemed to be a
pledge or other encumbrance of assets. Collateral arrangements with respect to
swaps and other derivatives are also not deemed to be a pledge or other
encumbrance of assets.)
B-7
<PAGE>
h. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities. (For this
purpose, the deposit or payment of initial or variation margin in connection
with futures contracts or related options transactions is not considered the
purchase of a security on margin.)
i. Make short sales of securities or maintain a short position, if, when
added together, more than 100% of the value of the Fund's net assets would be
(i) deposited as collateral for the obligation to replace securities borrowed to
effect short sales, and (ii) allocated to segregated accounts in connection with
short sales. Short sales "against the box" are not subject to this limitation.
j. Invest in securities of other investment companies, except to the extent
permitted by the 1940 Act, or by exemptive order issued by the Securities and
Exchange Commission.
If a percentage restriction described in the Fund's Prospectus or this SAI
is adhered to at the time of investment, a subsequent increase or decrease in a
percentage resulting from a change in the values of assets will not constitute a
violation of that restriction, except for the policy regarding borrowing or as
otherwise specifically noted.
The investment policies of the Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by the Advisor subject to
review and approval by the Board of Trustees of the Trust (the "Board of
Trustees"), without shareholder approval, except that any Fund policy explicitly
identified as "fundamental" may not be changed without the approval of the
holders of a majority of the outstanding shares of the Fund (which in the
Prospectus and this Statement of Additional Information means the lesser of (i)
67% of the shares of the Fund represented at a meeting at which 50% or more of
the outstanding shares are represented or (ii) more than 50% of the outstanding
shares).
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made at least annually. Also, the Fund
expects to distribute any undistributed net investment income on or about
December 31 of each year. Any net capital gains realized through the period
ended October 31 of each year will also be distributed by December 31 of each
year.
Each distribution by the Fund is accompanied by a brief explanation of the
form and character of the distribution. In January of each year the Fund will
issue to each shareholder a statement of the federal income tax status of all
distributions.
B-8
<PAGE>
TAX INFORMATION
The Fund intends to qualify and continue to elect to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986 (the "Code"), provided it complies with all applicable requirements
regarding the source of its income, diversification of its assets and timing of
distributions. The Fund's policy is to distribute to its shareholders all of its
investment company taxable income and any net realized capital gains for each
fiscal year in a manner that complies with the distribution requirements of the
Code, so that the Fund will not be subject to any federal income or excise
taxes. To comply with the requirements, the Fund must also distribute (or be
deemed to have distributed) by December 31 of each calendar year (i) at least
98% of its ordinary income for such year, (ii) at least 98% of the excess of its
realized capital gains over its realized capital losses for the 12-month period
ending on October 31 during such year and (iii) any amounts from the prior
calendar year that were not distributed and on which the Fund paid no federal
income tax.
If the Fund does not qualify for taxation as a regulated investment company
for any taxable year, the Fund's income will be subject to corporate income
taxes imposed at the Fund level, and all distributions from earnings and
profits, including distributions of net exempt-interest income and net capital
gain (i.e., the excess, if any, of net long-term capital gain over net
short-term capital loss), will be taxable to shareholders as ordinary income. In
addition, in order to requalify for taxation as a regulated investment company,
the Fund may be required to recognize unrealized gains, pay substantial taxes
and interest, and make certain distributions.
The Fund's ordinary income generally consists of interest and dividend
income less expenses. Net realized capital gains for a fiscal period are
computed by taking into account any capital loss carryforward of the Fund.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Fund designates the amount
distributed as a qualifying dividend. This designated amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Fund for its
taxable year. In view of the Fund's investment policy, it is expected that
dividends from domestic corporations will be part of the Fund's gross income and
that, accordingly, part of the distributions by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. However, the portion of
the Fund's gross income attributable to qualifying dividends is largely
dependent on the Fund's investment activities for a particular year and
therefore cannot be predicted with any certainty. The deduction may be reduced
or eliminated if the Fund shares held by a corporate investor are treated as
debt-financed or are held for less than 46 days and certain other conditions are
not met.
B-9
<PAGE>
A redemption of Fund shares may result in recognition of a taxable gain or
loss. Any loss realized upon a redemption of shares within six months from the
date of their purchase will be treated as a long-term capital loss to the extent
of any amounts treated as distributions of long-term capital gains during such
six-month period. Any loss realized upon a redemption of Fund shares may be
disallowed under certain wash sale rules to the extent shares of the Fund are
purchased (through reinvestment of distributions or otherwise) within 30 days
before or after the redemption.
Under the Code, the Fund generally will be required to report to the
Internal Revenue Service ("IRS") all distributions of ordinary income and
capital gains as well as gross proceeds from the redemption or exchange of Fund
shares.. Pursuant to the backup withholding provisions of the Code,
distributions of any taxable income and capital gains and proceeds from the
redemption of Fund shares may be subject to withholding of federal income tax at
the rate of 31 percent in the case of non-exempt shareholders who fail to
furnish the Fund with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law. If the
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in additional shares, will be reduced by the
amounts required to be withheld. Corporate and other exempt shareholders should
provide the Fund with their taxpayer identification numbers or certify their
exempt status in order to avoid possible erroneous application of backup
withholding. The Fund reserves the right to refuse to open an account for any
person failing to provide a certified taxpayer identification number.
The Fund will not be subject to corporate income tax in the Commonwealth of
Massachusetts as long as its qualifies as a regulated investment company for
federal income tax purposes. Distributions and the transactions referred to in
the preceding paragraphs may be subject to state, local and foreign income
taxes, and the tax treatment thereof may differ from the federal income tax
treatment.
The Fund's transactions in options, futures contracts, hedging transactions,
forward contracts, straddles and foreign currencies will be subject to special
tax rules (including mark-to-market, constructive sale, straddle, wash sale and
short sale rules), the effect of which may be to accelerate income to the Fund,
defer losses to the Fund, cause adjustments in the holding periods of the Fund's
securities, convert long-term capital gains into short-term capital gains and
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders of the Fund.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
B-10
<PAGE>
In addition, the foregoing discussion of tax law is based on existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative rulings and court decisions, all of which are subject to
change. Any such charges could affect the validity of this discussion. The
discussion also represents only a general summary of tax law and practice
currently applicable to the Fund and certain shareholders therein, and, as such,
is subject to change. In particular, the consequences of an investment in shares
of the Fund under the laws of any state, local or foreign taxing jurisdictions
are not discussed herein. Each prospective investor should consult his or her
own tax advisor to determine the application of the tax law and practice in his
or her own particular circumstances.
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by the
initial shareholders of the Trust, are responsible for the overall management of
the Trust, including general supervision and review of the investment activities
of the Fund. The Trustees, in turn, elect the officers of the Trust, who are
responsible for administering the day-to-day operations of the Trust and its
separate series. The current Trustees and officers, their affiliations, dates of
birth and principal occupations for the past five years are set forth below.
MARGARET M. TOWLE* (50) Chairman of the Board of Trustees, Trustee and President
One Yesler Building, Suite 200, Seattle, Washington 98104. Chief Executive
Officer, Chief Investment Officer and Portfolio Manager of the Advisor since
February, 1998; self-employed investment advisory consultant since October,
1997; formerly Chairman, Chief Executive Officer, Director and Secretary of
Towle Associates, Inc., an international investment advisory firm, from October,
1991 to September, 1997. Ph.D. in Political Economy and Public Finance from the
University of Washington in 1982 and M.A. in Public Administration from the
University of Washington in 1976.
MARY BECHMANN (41) Trustee
13416 Middle Fork Lane, Los Altos Hills, California 94022; Self-employed private
investor since June, 1996; formerly Managing Director at Baccharis Capital, a
private equity fund, from June, 1992 to June, 1996. M.B.A.
from Stanford University in 1985.
JOHN W. PEAVY III (54) Trustee
7512 Glenshannon Circle, Dallas, Texas 75225; President of Peavy Financial
Services, Inc. since March, 1982; formerly Chairman of the Board of Directors
and Chief Investment Officer of Founders Trust Company from April, 1993 to May,
1998. Ph.D. in Finance from the University of Texas at Arlington in 1978; M.B.A.
from the Wharton School at the University of Pennsylvania in 1968.
B-11
<PAGE>
JOSEPH C. PELLEGRINO (57) Trustee
201 Isabella Street, 5th Floor, Pittsburgh, Pennsylvania 15212-5858; Vice
President - Pension Fund Investments and Analysis at Aluminum Company of America
since August, 1991. Doctor of Jurisprudence Degree from Duquesne University in
1984; Ph.D. in Finance from Northwestern University in 1972 and M.B.A. from the
University of Pittsburgh in 1966.
- ----------
*Indicates an "interested person" of the Trust as defined in the 1940 Act.
The Trust pays no compensation to its officers or to the Trustees listed
above who are officers or employees of the Advisor. Each Trustee who is not an
officer or employee of the Advisor is compensated at the rate of $5,000 per
annum. The Trust provides no pension or retirement benefits to its Trustees, but
has adopted a deferred payment arrangement under which each Trustee who is to
receive fees from the Trust may elect not to receive such fees from the Trust on
a current basis but to receive in a subsequent period an amount equal to the
value that such fees would have been if they had been invested in the Fund on
the normal payment date for such fees. As a result of this method of calculating
the deferred payments, the Fund, upon making the deferred payments, will be in
the same financial position as if the fees had been paid on the normal payment
dates.
The following table sets forth information covering the total compensation
paid (or deferred in lieu of current payment) by the Trust during its fiscal
year ended May 31, 1999 to the persons who served as Trustees during such
period:
TOTAL COMPENSATION
AGGREGATE FROM FUND AND FUND
COMPENSATION COMPLEX PAID TO
TRUSTEE FROM FUND TRUSTEES*
- ------- ------------ ------------------
Margaret M. Towle -0- -0-
Mary Bechmann $5,000 $5,000
John W. Peavy III 5,000 5,000
Joseph C. Pellegrino 5,000 5,000
* No Trustee received any compensation from any mutual fund affiliated with the
Advisor other than the Trust.
As of the date of this SAI, the Trustees and officers of the Trust as a
group did not own more than 1% of the outstanding shares of any class of the
Fund.
B-12
<PAGE>
THE FUND'S INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to
the Fund by Puget Sound Asset Management Co., LLC, the Advisor, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement"). As compensation, the
Fund pays the Advisor a monthly management fee (accrued daily) based upon the
average daily net assets of the Fund at the annual rate of 2.00%. Such
management fee is paid by each class of shares of the Fund based upon the
average daily net assets of each class.
The Advisor furnishes the Fund with the management of the investment and
reinvestment of the assets belonging to the Fund, subject to the authority of
the Advisor to delegate certain of its responsibilities hereunder to one or more
sub-advisors. Upon delegation of the management of the investment and
reinvestment of the assets belonging to the Fund to one or more sub-advisors,
the Advisor, among other things, supervises and oversees of each such
sub-advisor's provision of portfolio management services with respect to the
Fund, evaluates periodically the portfolio management services provided by each
such sub-advisors and the investment performance of the Fund and advises and
consults with the Board of Trustees with respect to matters relating to the
investment operations of the Fund, including matters relating to the selection,
evaluation, retention and possible termination of each sub-advisor.
The Advisory Agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund and (ii) by
vote of a majority of the Trustees who are not "interested persons" of the Trust
or the Advisor, as that term is defined in the 1940 Act, cast in person at a
meeting called for the purpose of voting on such approval. Any amendment to the
Advisory Agreement must be approved (i) by vote of a majority of the outstanding
voting securities of the Fund and (ii) by vote of a majority of the Trustees who
are not such interested persons, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement may be terminated
without penalty by vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund, upon sixty days' written notice to
the Advisor, or by the Advisor upon ninety days' written notice to the Trust,
and terminates automatically in the event of its assignment. In addition, the
Advisory Agreement will automatically terminate if the Trust or the Fund shall
at any time be required by the Advisor to eliminate all reference to the word
"Puget Sound" in the name of the Trust or the Fund, unless the continuance of
the Advisory Agreement after such change of name is approved by vote of a
majority of the outstanding voting securities of the Fund and by vote of a
majority of the Trustees who are not interested persons of the Trust or the
Advisor, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement also provides that the Advisor shall not be
subject to any liability in connection with the performance of its services
thereunder in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
B-13
<PAGE>
For the period June 16, 1998 (commencement of operations) through May 31,
1999, the Advisor received advisory fees of $__________, net of a waiver of
$__________. For the same period, the Advisor voluntarily reimbursed the Fund
for expenses in the amount of $__________.
SUB-ADVISOR
Fiduciary Asset Management Co. is the Sub-Advisor to the Fund pursuant to a
Sub-Advisory Agreement. The Sub-Advisor, under the general oversight of the
Advisor and the Board of Trustees, manages the Fund's assets on a day-to-day
basis. Charles Walbrandt, the Sub-Advisor's president owns 100% of the voting
interest of the Sub-Advisor and therefore is regarded to control the Sub-Advisor
for purposes of the 1940 Act.
The Sub-Advisory Agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund and (ii) by
vote of a majority of the Trustees who are not "interested persons" of the
Trust, the Advisor or the Sub-Adviser, as that term is defined in the 1940 Act,
cast in person at a meeting called for the purpose of voting on such approval.
Any amendment to the Sub-Advisory Agreement must be approved (i) by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the Trustees who are not such interested persons, cast in person at
a meeting called for the purpose of voting on such approval. The Sub-Advisory
Agreement may be terminated without penalty by vote of the Board of Trustees or
by vote of a majority of the outstanding voting securities of the Fund, upon
sixty days' written notice to the Sub-Adviser, and terminates automatically in
the event of its assignment. The Sub-Advisory Agreement also provides that the
Sub-Adviser shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
As described in the Prospectus, the Trust applied for an exemptive order
from the Securities and Exchange Commission to permit the Advisor, subject to
the approval of the Board of Trustees and certain other conditions, to enter
into sub-advisory agreements with sub-advisers other than the current
sub-adviser for the Fund and amend sub-advisory agreements with sub-advisers
without obtaining shareholder approval. See "Management of the Fund" in the
Prospectus.
For its services, the Sub-Advisor receives a sub-advisory fee from the
Advisor at the annual rate of 1.50% of the average daily net asset value of the
Fund, which payment will be paid out of the fee received by the Advisor from the
Fund. For the period April 16, 1998 (commencement of operations) through May 31,
1999, the Sub-Advisor received fees from the Advisor of $__________.
B-14
<PAGE>
THE FUND'S ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company
Administration, LLC (the "Administrator"), with offices at 4455 E. Camelback
Rd., Ste. 261-E, Phoenix, AZ 85018. The Adminstrator is an affiliate of the
Fund's Distributor. The Administration Agreement provides that the Administrator
will prepare and coordinate reports and other materials supplied to the
Trustees; prepare and/or supervise the preparation and filing of all securities
filings, periodic financial reports, prospectuses, statements of additional
information, marketing materials, tax returns, shareholder reports and other
regulatory reports or filings required of the Fund; prepare all required notice
filings necessary to maintain the Fund's ability to sell shares in all states
where the Fund currently does, or intends to do business; coordinate the
preparation, printing and mailing of all materials (e.g., Annual Reports)
required to be sent to shareholders; coordinate the preparation and payment of
Fund related expenses; monitor and oversee the activities of the Fund's
servicing agents (i.e., transfer agent, custodian, fund accountants, etc.);
review and adjust as necessary the Fund's daily expense accruals; and perform
such additional services as may be agreed upon by the Fund and the
Administrator. For its services, the Administrator receives a monthly fee at the
following annual rate:
Average Net Assets Fee or Fee Rate(1)
- ------------------ ------------------
Under $200 million .10% of average net assets
$200 million to $500 million .05% of average net assets
Over $500 million .03% of average net assets
Subject to an annual minimum of $40,000 per Fund and $15,000 per each additional
share class.
(1) The Administrator has agreed to reduce its fees for eighteen months
starting July 1, 1999, to .05% on the Fund's average net assets up to $500
million and .03% thereafter. In addition, the Administrator will reduce its
annual minimum to $30,000 per Fund and $5,000 per each additional share of class
for twelve months starting July 1, 1999.
Prior to July 1, 1999, BISYS Fund Services Ohio, Inc was the Fund's
Administrator. For the period April 16, 1998 (commencement of operations)
through June 30, 1999, the Fund paid BISYS Fund Services Ohio, Inc. a monthly
fee at the annual rate of 0.15% of the average daily net assets of the Fund plus
out of pocket expenses, which totaled $__________ received $__________ in
administration fees from the Fund.
B-15
<PAGE>
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc., (the "Distributor"), 4455 E. Camelback Road,
Suite 261E, Phoenix, AZ 85018, a corporation owned by Mr. Banhazl, Mr. Paggioli
and Mr. Wadsworth, acts as the Funds' principal underwriter in a continuous
public offering of the Fund's shares. Under the Distribution Agreement between
the Fund and the Distributor, the Distributor is not obligated to sell any
specific amount of shares of the Trust. The Distribution Agreement continues in
effect for a period of one year, and from year to year thereafter, if approved
at least annually by (i) the Board of Trustees and (ii) a majority of the
Trustees who are not interested persons of the Trust and have no direct or
indirect financial interest in the operation of the Trust's Distribution Plan,
the Distribution Agreement or any other Agreement related to the Distribution
Plan., in each case cast in person at a meeting called for the purpose of voting
on such approval. The Distribution Agreement may be terminated without penalty
by the parties thereto upon no more than sixty days' written and no less than 30
days' notice, and is automatically terminated in the event of its assignment as
defined in the 1940 Act.
Prior to July 1, 1999, BISYS Fund Services Limited Partnership ("BISYS,
L.P.") was the Fund's Distributor. For the period June 29, 1998 (commencement of
operations of the Trust) through May 31, 1999, the aggregate sales commissions
received by BISYS with respect to Investor Shares were $__________.
Solely for the purpose of compensating the Distributor for services and
expenses primarily intended to result in the sale of Investor Shares, such
shares are subject to an annual distribution fee of up to 0.50% of the average
daily net assets attributable to such shares in accordance with a Distribution
Plan (the "Distribution Plan") adopted by the Trust pursuant to Rule 12b-1 under
the 1940 Act. Currently, the Fund pays the Distributor an annual distribution
fee of 0.25% of the Fund's average daily net assets attributable to Investor
Shares. Activities which the Distributor may pay for using revenues under the
Distribution Plan include (but are not limited to) the development and
implementation of direct mail promotions and advertising for sales of Investor
Shares, the preparation, printing and distribution of prospectuses for the Fund
to recipients other than existing shareholders, and payments to participating
brokers of Investor Shares. The Distribution Plan is of the type known as a
"compensation" plan. This means that, although the Trustees of the Trust are
expected to take into account the expenses of the Distributor in their periodic
review of the Distribution Plan, the fees are payable to compensate the
Distributor for services rendered even if the amount paid exceeds the
Distributor expenses.
B-16
<PAGE>
The Distribution Plan may be terminated with respect to Investor Shares by
vote of a majority of the Trustees who are not interested persons of the Trust
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Distribution Plan or the Distribution
Agreement, or by a vote of majority of the outstanding voting securities of that
class. Any change in the Distribution Plan that would materially increase the
cost to the Investors Shares to which the Distribution Plan relates requires
approval by the Investor Shares' shareholders. The Trustees review quarterly a
written report of such costs and the purposes for which such costs have been
incurred. Except as described above, the Distribution Plan may be amended by
vote of the Trustees, including a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Distribution Plan
or the Distribution Agreement, cast in person at a meeting called for the
purpose. For so long as the Distribution Plan is in effect, selection and
nomination of those Trustees who are not interested persons of the Trust shall
be committed to the discretion of such disinterested persons.
The Distribution Plan will continue in effect with respect to each class of
shares to which it relates for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Distribution Plan or the Distribution Agreement and (ii) by the vote of a
majority of the entire Board of Trustees, cast in person at a meeting called for
that purpose.
For the period April 16, 199 through May 31, 1999, the Fund paid fees to
the Fund's former Distributor of $__________ under the Distribution Plan, of
which $__________ was paid out as selling compensation to dealers, $__________
was for reimbursement of printing, and mailing of prospectuses to other than
current shareholders, $__________ was compensated to sales personnel,
$__________, was compensated to underwriters, $__________ was interest and other
finance charges and $__________ was for reimbursement of advertising and
marketing materials expenses. Margaret M. Towle (Chairman of the Board of
Trustees, as trustee and the President of the Trust) had a direct financial
interest in the Distribution Plan as she was compensated by BISYS, L.P., for
services performed under the Distribution Plan as a registered representative of
BISYS L.P.
The Trustees believe that the Distribution Plan will provide benefits to
the Trust. The Trustees believe that the Distribution Plan will result in
greater sales and/or fewer redemptions of Investor Shares, although it is
impossible to know for certain the level of sales and redemptions of Investor
Shares that would occur in the absence of the Distribution Plan or under
alternative distribution schemes. The Trustees believe that the effect on sales
and/or redemptions benefit the Trust by reducing the Fund's expense ratios
and/or by affording greater flexibility to the Sub-Advisor.
B-17
<PAGE>
The Distributor, as shareholder servicing agent, may also provide (or
arrange for another intermediary or agent to provide) certain additional
services to Investor Shares' shareholders of the Fund (the Distributor or such
entity is referred to as a "Servicing Agent" in such capacity). Such services
may include transfer agent and sub-transfer agent services, accounting services,
personal and/or account maintenance services and other administrative and
recordkeeping services to both record owners and non-record owners of Investor
Shares. A Servicing Agent will be paid some or all of the shareholder servicing
fees charged with respect to Investor Shares pursuant to a Shareholder Servicing
Plan for such shares. For the services provided, the Shareholder Servicing Plan
permits the Fund to pay annual fees of up to 0.25% of the average daily net
asset value of Investor Shares for which such Servicing Agents provide services
for the benefit of customers.
For the period April 16, 1998 through May 31, 1999, fees of $__________
were paid to BISYS Fund Services Limited Partnership, as the Fund's former
shareholder servicing agent.
EXECUTION OF PORTFOLIO TRANSACTIONS
Transactions on U.S. stock exchanges and other agency transactions for the
account of the Fund involve the payment by the Fund of negotiated brokerage
commissions. Such commissions vary among different brokers. A particular broker
may charge different commissions according to such factors as the difficulty and
size of the transaction. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Fund usually includes an undisclosed dealer commission, markup or markdown. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
In addition to selecting portfolio investments for the Fund, the
Sub-Adviser selects brokers or dealers to execute securities purchases and sales
for the Fund's account. The Sub-Adviser selects only brokers or dealers which it
believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates which, when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates. The
Sub-Adviser will use its best efforts to obtain information as to the general
level of commission rates begin charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account. The Fund will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of the value of
research services provided by the broker or in recognition of the value of any
other services provided by the broker which do not contribute to the best price
and execution of the transaction.
The Sub-Adviser's receipt of research services from brokers may sometimes
be a factor in its selection of a broker that it believes will provide best
price and execution for a transaction. These research services include not only
a wide variety of reports on such matters as economic and political
developments, industries, companies, securities, portfolio strategy, account
performance, daily prices of securities, stock and bond market conditions and
projections, asset allocation and portfolio structure, but also meetings with
management representatives of issuers and with other analysts and specialists.
Although it is in many cases not possible to assign an exact dollar value to
these services, they may, to the extent used, tend to reduce the Sub-Adviser's
expenses. Such services may be used by the Sub-Adviser in managing other client
accounts and in some cases may not be used with respect to the Fund. Receipt of
services or products other than research from brokers is not a factor in the
selection of brokers. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, purchases of shares of the Fund by customers of broker-dealers may be
considered as a factor in the selection of broker-dealers to execute the Fund's
securities transactions.
B-18
<PAGE>
The Sub-Adviser may cause the Fund to pay a broker-dealer that provides
brokerage and research services to the Sub-Adviser an amount of commission for
effecting a securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. The Sub-Adviser
must determine in good faith that such greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund and its other clients. The
Sub-Adviser's authority to cause the Fund to pay greater commissions is also
subject to such policies as the Trustees of the Trust may adopt from time to
time.
For the period April 16, 1998 through May 31, 1999, the Fund paid
$__________ in brokerage commissions. During such period, the Fund directed
brokerage transactions totaling $__________ for commission totaling $__________
to firms who furnished research services.
PORTFOLIO TURNOVER
Portfolio securities may be sold without regard to the length of time they
have been held when, in the opinion of the Sub-Advisor, investment
considerations warrant such action. Portfolio turnover rate is calculated by
dividing (1) the lesser of purchases or sales of portfolio securities for the
fiscal year by (2) the monthly average of the value of portfolio securities
owned during the fiscal year. A 100% turnover rate would occur if all the
securities in the Fund's portfolio, with the exception of securities whose
maturities at the time of acquisition were one year or less, were sold and
either repurchased or replaced within one year. A high rate of portfolio
turnover (100% or more) generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Portfolio Transactions and
Brokerage" and Distributions and Tax Information." For the period June 16, 1998
(commencement of operations) through May 31, 1999, the Fund had a portfolio
turnover rate of __________%.
B-19
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Fund's Prospectus regarding the purchase and redemption of Fund shares.
HOW TO BUY SHARES
You may purchase shares of the Fund from the Fund directly or also through
selected securities brokers, dealers or financial intermediaries. Investors
should contact these agents directly for appropriate instructions, as well as
information pertaining to accounts and any service or transaction fees that may
be charged by those agents. Purchase orders through securities brokers, dealers
and other financial intermediaries are effected at the next-determined public
offering price after receipt of the order in proper form by such agent before
the Fund's daily cutoff time. Orders received after that time will be purchased
at the next-determined public offering price.
PURCHASES AT NET ASSET VALUE
Investor Shares may be purchased at net asset value by:
* investment advisors, financial planners or other intermediaries who
place trades for their own accounts or the accounts of their clients
and who charge a management, consulting or other fee for their
services; clients of such investment advisers, financial planners or
other intermediaries who place trades for their own accounts if the
accounts are linked to the master account of such investment advisor,
financial planner or other intermediary on the books and records of
the broker or agent; and retirement and deferred compensation plans
and trusts used to fund those plans, including, but not limited to,
those defined in Section 401(a), 401(k), 403(b) or 457 of the Code and
rabbi trusts
* certain current and retired employees of the Advisor, the Sub-Advisor,
the Distributor or the Administrator; current and former Trustees of
the Trust; registered representatives of broker-dealers that have
selling arrangement with the Distributor or the Administrator; the
spouse, parents, children, siblings, grandparents or grandchildren of
the persons listed above; and any trust, pension, profit sharing or
other benefit plan for any of the foregoing persons
* accounts of bank trust departments or trust companies
* participant-directed 401(a) and 401(k) plans that have 50 or more
eligible employees
In addition, you may purchase shares of the Fund at net asset value to the
extent that the investment represents the proceeds from a redemption of shares
made within the prior 30 days (the purchase price of which included a front-end
sales charge equal to or greater than that imposed by the Fund) of another
mutual fund. When making a purchase at net asset value pursuant to this
provision, you must furnish a broker's confirmation statement (or other
documentation satisfactory to the Fund) showing the payment of the front-end
sales charge.
B-20
<PAGE>
The reasons the Fund offers Investor Shares to such entities and
individuals at net asset value include, but are not limited to, lower marketing
and sales expenses associated with any such sales (and in the case of sales to
trustees, officers or other affiliated persons of the Trust, no marketing
expenses) and such purchases through financial intermediaries that are otherwise
corporated by clients for the provision of services in connection with the
purchasing and selling Fund shares. Investors who qualify to buy Fund shares at
net asset value may be charged a fee if they effect transactions in Fund shares
through a broker or agent.
REDUCED SALES CHARGES-INVESTOR SHARES
LETTER OF INTENT. An investor may obtain a reduced sales charge by means of
a written Letter of Intent that expresses the intention of such investor to
invest a certain amount in shares of the Fund within a period of 13 months. Each
purchase of shares under a Letter of Intent will be made at the public offering
price plus the sales charge applicable at the time of such purchase to a single
transaction of the total dollar amount indicated in the Letter of Intent. The
13-month period during which the Letter of Intent is in effect will begin on the
date of the earliest purchase to be included. Five percent of all investments
made by a shareholder under a Letter of Intent will be held in escrow for the
period of the Letter. If the investor does not fulfill the Letter of Intent, the
amount of the sales charge that would apply in the absence of the Letter will be
paid to the Distributor out of the escrowed portion of the shareholder's
account. The Letter of Intent program may be modified or eliminated at any time
or from time to time by the Fund without notice.
RIGHTS OF ACCUMULATION. Pursuant to rights of accumulation, a shareholder
may combine a current purchase of shares of the Fund with prior purchases of
shares of the Fund. The public offering price applicable to a purchase of shares
is based on the sum of (i) the shareholder's current purchase of shares of the
Fund and (ii) the then current net asset value of the shareholder's holdings of
shares of the Fund.
OFFERING PRICE
The public offering price of Fund shares is the net asset value, plus any
applicable sales charge. The Fund receives the net asset value, and the sales
charge (the difference between the offering price and the net asset value), if
any, is distributed to the Distributor. See "Institutional and Investor Shares -
How to Buy Shares" in the prospectus for more information on the sales charge..
Shares are purchased at the public offering price next determined after the
Transfer Agent receives your order in proper form. In most cases, in order to
receive that day's public offering price, the Transfer Agent must receive your
order in proper form before the close of regular trading on the New York Stock
Exchange ("NYSE"), normally 4:00 p.m., Eastern time. If you buy shares through
your investment representative, the representative must receive your order
before the close of regular trading on the NYSE to receive that day's public
offering price. Orders are in proper form only after funds are converted to U.S.
funds.
B-21
<PAGE>
One each purchase, the net asset value is invested in the Fund and the
sales charge is paid to the Distributor. The Distributor reallows a portion of
the sales charge to the dealer responsible for your order, as shown in the
following table:
Dealer Reallowance
as a % of
Your Investment Offering Price
- --------------- ------------------
Up to $100,000 2.70
$100,000 but less than $250,000 2.25
$250,000 but less than $500,000 1.80
$500,000 but less than $1,000,000 0.90
$1,000,000 or more None
The NYSE annually announces the days on which it will not be open for
trading. The most recent announcement indicates that it will not be open on the
following days: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. However, the NYSE may close on days not included in that
announcement.
If you are considering redeeming or transferring shares to another person
shortly after purchase, you should pay for those shares with a certified check
to avoid any delay in redemption, exchange or transfer. Otherwise the Fund may
delay payment until the purchase price of those shares has been collected or. To
eliminate the need for safekeeping, the Fund will not issue certificates for
your shares unless you request them.
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of the Fund's shares, (ii) to reject purchase orders in whole
or in part when in the judgment of the Advisor or the Distributor such rejection
is in the best interest of the Fund, and (iii) to reduce or waive the minimum
for initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
AUTOMATIC INVESTMENT PLAN
As discussed in the Prospectus, the Fund provides an Automatic Investment
Plan for the convenience of investors who wish to purchase shares of the Fund on
a regular basis. All record keeping and custodial costs of the Automatic
Investment Plan are paid by the Fund. The market value of the Fund's shares is
subject to fluctuation, so before undertaking any plan for systematic
investment, the investor should keep in mind that this plan does not assure a
profit nor protect against depreciation in declining markets.
B-22
<PAGE>
HOW TO SELL SHARES
You can sell your Fund shares any day the NYSE is open for regular trading,
either directly to the Fund or through your investment representative.
Selling shares through your investment representative
Your investment representative must receive your request before the close
of regular trading on the NYSE to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Transfer Agent, and may charge you for its services.
Delivery of redemption proceeds
Payments to shareholders for shares of the Fund redeemed directly from the
Fund will be made as promptly as possible but no later than seven days after
receipt by the Fund's Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Fund
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the NYSE is restricted as determined by the SEC or
the NYSE is closed for other than weekends and holidays; (b) an emergency exists
as determined by the SEC making disposal of portfolio securities or valuation of
net assets of the Fund not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Fund's shareholders. Under
unusual circumstances, the Fund may suspend redemptions, or postpone payment for
more than seven days, but only as authorized by SEC rules.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the Fund's portfolio
securities at the time of redemption or repurchase.
TELEPHONE REDEMPTIONS
Shareholders must have selected telephone transactions privileges on the
Account Application when opening a Fund account. Upon receipt of any
instructions or inquiries by telephone from a shareholder or, if held in a joint
account, from either party, or from any person claiming to be the shareholder,
the Fund or its agent is authorized, without notifying the shareholder or joint
account parties, to carry out the instructions or to respond to the inquiries,
consistent with the service options chosen by the shareholder or joint
shareholders in his or their latest Account Application or other written request
for services, including purchasing or redeeming shares of the Fund and
depositing and withdrawing monies from the bank account specified in the Bank
Account Registration section of the shareholder's latest Account Application or
as otherwise properly specified to the Fund in writing.
B-23
<PAGE>
The Transfer Agent will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund and the Transfer Agent may be liable for
any losses due to unauthorized or fraudulent instructions. If these procedures
are followed, an investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.
When a telephonic redemption request is received, the proceeds are wired to
the bank account previously chosen by the shareholder and a nominal wire fee
(currently $5.00) is deducted. Telephonic redemption requests must be received
by the Fund prior to the close of regular trading on the NYSE on a day when the
NYSE is open for business. Requests made after that time or on a day when the
NYSE is not open for business cannot be accepted by the Fund and a new request
will be necessary.
In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form available from the Fund. When selecting the service, a
shareholder must designate a bank account to which the redemption proceeds
should be wired. Any change in the bank account so designated must be made by
furnishing to the Fund a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if an investor's bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Trust, and its transfer agent and custodian are not responsible for
the authenticity of withdrawal instructions received by telephone.
The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by the Fund in proper form, less any redemption fee, if applicable.
Proceeds resulting from a written redemption request will normally be mailed to
you within seven days after receipt of your request in good order. Telephonic
redemption proceeds will normally be wired on the first business day following
receipt of a proper redemption request. In those cases where you have recently
purchased your shares by check and your check was received less than 10 days
prior to the redemption request, the Fund may withhold redemption proceeds until
your check has cleared, which may take up to 10 days from the purchase date.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus, or contact your investment representative. The Telephone Redemption
Privilege may be modified or terminated without notice.
B-24
<PAGE>
REDEMPTIONS-IN-KIND
The Fund has reserved the right to pay the redemption price of its shares,
either totally or partially, by a distribution in kind of portfolio securities
(instead of cash). The securities so distributed would be valued at the same
amount as that assigned to them in calculating the net asset value for the
shares being sold. If a shareholder receives a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Trust has filed an election under SEC Rule 18f-1 committing to pay
in cash all redemptions by a shareholder of record up to amounts specified by
the rule (approximately $250,000).
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of
shares of the Fund will be determined once daily as of the close of public
trading on the NYSE (normally 4:00 p.m., Eastern time) on each day that the NYSE
is open for trading. The Fund does not expect to determine the net asset value
of its shares on any day when the NYSE is not open for trading even if there is
sufficient trading in its portfolio securities on such days to materially affect
the net asset value per share. However, the net asset value of the Fund's shares
may be determined on days the NYSE is closed or at times other than 4:00 p.m. if
the Board of Trustees decides it is necessary.
In valuing the Fund's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Trustees of the
Trust shall determine in good faith to reflect the security's fair value. All
other assets of the Fund are valued in such manner as the Board of Trustees in
good faith deems appropriate to reflect their fair value.
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
B-25
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in advertisements
and investor communications. Total return may be stated for any relevant period
as specified in the advertisement or communication. Any statements of total
return will be accompanied by information on the Fund's average annual
compounded rate of return for the most recent one, five and ten year periods, or
shorter periods from inception, through the most recent calendar quarter. The
Fund may also advertise aggregate and average total return information over
different periods of time.
The Fund's total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of the Fund's
performance by independent sources may also be used in advertisements and in
information furnished to present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for any
period should not be considered as a representation of what an investment may
earn or what an investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which the
maximum sales load is deducted
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
B-26
<PAGE>
The Fund's average annual total return for the period June 16, 1998
(commencement of operations) through May 31, 1999 are as follows:
Institutional Shares ____%
Investor Shares ____%
Performance information about the Fund will be provided in the Fund's
annual report, which report will be available upon request and without charge.
In addition, from time to time, articles about the Fund regarding performance,
rankings and other characteristics of the Fund may appear in publications
including, but not limited to the publications included in Appendix B. In
particular, the performance of the Fund may be compared in some or all of these
publications to the performance of various indices and investments for which
reliable performance data is available and to averages, performance rankings, or
other information prepared by recognized mutual fund statistical services. Such
publications may also publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of such articles may
be used in the Fund's promotional literature. References to articles regarding
personnel of the sub-adviser(s) who have portfolio management responsibility may
also be used in the Fund's promotional literature. For additional information
about the Fund's advertising and promotional literature, see Appendix C.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
Custodial Trust Company, located at 101 Carnegie Center, Princeton, NJ
08540 acts as Custodian of the securities and other assets of the Fund.
Custodial Trust Company holds safekeeping securities and cash belonging to the
Fund and, in such capacity, is the registered owner of securities held in book
entry form belonging to the Fund. Upon instruction, Custodial Trust Company
receives and delivers cash and securities of the Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. National Financial Data Services, P.O. Box
419284, Kansas City, MO 64141-6284 acts as the Fund's transfer and shareholder
service agent. The Custodian and Transfer Agent do not participate in decisions
relating to the purchase and sale of securities by the Fund.
Deloitte & Touche LLP, 50 Fremont Street, San Francisco, CA 94105 are the
independent auditors for the Fund. Deloitte & Touche LLP conducts an annual
audit of the Trust's financial statements, assists in the preparation of the
Fund's federal and state income tax returns and consults with the Fund as to
matters of accounting and federal and state income taxation.
B-27
<PAGE>
Ropes & Gray, One International Place, Boston, MA 02110, are legal counsel
to the Fund.
As of July 20, 1999, the following persons owned of record more than 25% of the
Fund's , and therefore the Trust's, voting securities:
FUND % OWNED
- ---- -------
Institutional Shares:
Charles Schwab 81%
101 Montgomery Street
San Francisco, CA 94107
Investor Shares:
Charles Schwab 56%
101 Montgomery Street
San Francisco, CA 94107
On July 20, 1999, the following persons owned of record more that 5% of a
class of the Fund's outstanding voting securities:
FUND % OWNED
- ---- -------
INSTITUTIONAL SHARES:
Charles Schwab 81%
101 Montgomery Street
San Francisco, CA 94107
Northern Trust Company 8%
1201 3rd Avenue, Ste. 2010
Seattle, WA 98101
INVESTOR SHARES:
Charles Schwab 56%
101 Montgomery Street
San Francisco, CA 94107
Resources Trust Company 21%
P.O. Box 3865
Englewood, CO 80155
B-28
<PAGE>
The Trust was organized as a Massachusetts business trust on April 14,
1998. The Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, without
par value, which may be issued in any number of series. The Board of Trustees
may from time to time issue other series, the assets and liabilities of which
will be separate and distinct from any other series.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or the Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of the Fund. The Declaration of Trust
further provides that the Trustees may also terminate the Trust or the Fund upon
written notice to the shareholders.
The shares of the Fund are divided into two classes - the Institutional
Shares and the Investor Shares. All expenses of the Fund are borne by all the
shares in the Fund, regardless of class, on a pro rata basis relative to the net
assets of each class, except for distribution fees and shareholder servicing
fees which are charged only to the Fund's Investor Shares.
The assets received by the Fund for the issue or sale of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to, and constitute the underlying assets of,
the Fund. The underlying assets of the Fund will be segregated from the assets
of any other series that may be established in the future and are charged with
the expenses with respect to the Fund and with a share of the general expenses
of the Trust. Any expenses of the Fund that are specific to a particular class
of shares of the Fund are charged only to the shares of that class. If at any
future time the Trust issues more than one series of shares, any general
expenses of the Trust that are not readily identifiable as belonging to the Fund
are allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable. While the expenses of the Trust
will be allocated to the separate books of account of each fund of the Trust,
certain expenses may be legally chargeable against the assets of all funds of
the Trust.
Shares issued by the Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. The Declaration of Trust provides that on any matter
submitted to a vote of all Trust shareholders, all Trust shares entitled to vote
shall be voted together irrespective of series or class unless the rights of a
particular series or class would be adversely affected by the vote, in which
case a separate vote of that series or class shall also be required to decide
the question. Also, a separate vote shall be held whenever required by the 1940
Act or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect
that a series or class shall be deemed to be affected by a matter unless it is
clear that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the Securities and Exchange Commission, shareholders of all series and
classes vote together, irrespective of series or class, on the election of
B-29
<PAGE>
Trustees and the selection of the Trust's independent accountants, but
shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory and sub-advisory agreements
relating to that series. Voting rights are not cumulative, so that the holders
of more than 50% of the shares voting in any election of Trustees can, if they
so choose, elect all of the Trustees. While the Trust is not required and does
not intend to hold annual meetings of shareholders, such meetings may be called
by the Trustees in their discretion, or upon demand by the holders of 10% or
more of the outstanding shares of the Trust if such demand is for the purpose of
electing or removing Trustees.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. The Declaration of
Trust also provides for indemnification and reimbursement of expenses out of the
Fund's assets for any shareholder held personally liable for obligations of the
Fund or Trust. The Declaration of Trust provides that the Trust shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Fund or Trust and satisfy any judgment thereon. All
such rights are limited to the assets of the Fund. The Declaration of Trust
further provides that the Trust may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, trustees, officers, employees and agents to cover
possible tort and other liabilities. Furthermore, the activities of the Trust as
an investment company would not likely give rise to liabilities in excess of the
Trust's total assets. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in the best interests of the Trust. No officer or Trustee may be
indemnified against any liability to the Trust or the Trust's shareholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
B-30
<PAGE>
FINANCIAL STATEMENTS
The Fund's annual report to shareholders for its fiscal year ended May 31,
1999 is a separate document supplied with this SAI, the financial statements,
accompanying notes and report of Deloitte & Touche LLP, independent accountants,
appearing in such annual report are incorporated by reference in this SAI and
are so incorporated by reference in reliance upon such report at Deloitte &
Touche LLP given upon the authority of such firm as experts in accounting and
auditing..
B-31
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have
a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
B-32
<PAGE>
APPENDIX B
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates Fund Action
Adam Smith's Money World Fund Decoder
America On Line Global Finance
Anchorage Daily News (the) Guarantor
Atlanta Constitution Hartford Courant
Atlanta Journal Houston Chronicle
Arizona Republic INC
Austin American Statesman Indianapolis Star
Baltimore Sun Individual Investor
Bank Investment Marketing Institutional Investor
Barron's National Public Radio International Herald Tribune
Bergen County Record (NJ) Internet
Bloomberg Business News Investment Advisor
Bond Buyer Investment Company Institute
Boston Business Journal Investment Dealers Digest
Boston Globe Investment Profiles
Boston Herald Investment Vision
Broker World Investor's Daily
Business Radio IRA Reporter
Business Week Journal of Commerce
CBS and affiliates Kansas City Star
CDA Investment Technologies KCMO (Kansas City)
CFO KOA-AM (Denver)
Changing Times LA Times
Chicago Sun Times Leckey, Andrew (syndicated column)
Chicago Tribune Lear's
Christian Science Monitor Life Association News
Christian Science Monitor News Service Lifetime Channel
Cincinnati Enquirer Miami Herald
Cincinnati Post Milwaukee Sentinel
CNBC Money
CNN Money Maker
Columbus Dispatch Money Management Letter
CompuServe Morningstar
Dallas Morning News Mutual Fund Market News
Dallas Times-Herald Mutual Funds Magazine
Denver Post National Underwriter
Des Moines NBC and affiliates
Detroit Free Press New England Business
B-33
<PAGE>
Donoghues Money Fund Report New England Cable News
Dorman, Dan (syndicated column) New Orleans Times-Picayune
Dow Jones News Service New York Daily News
Economist New York Times
FACS of the Week Network Newark Star Ledger
Fee Adviser Newsday
Financial News Network Newsweek
Financial Planning Nightly Business Report
Financial Planning on Wall Orange County Register
Financial Research Corp. Orlando Sentinel
Financial Services Week Palm Beach Post
Financial World Pension World
Fitch Insights Pensions and Investments
Forbes Personal Investor
Fort Worth Star-Telegram Philadelphia Inquirer
Fortune Porter, Sylvia (syndicated column)
Fox Network and affiliates
Portland Oregonian Tampa Tribune
Prodigy Time
Public Broadcasting Service Tobias, Andrew (syndicated column)
Quinn, Jane Bryant (syndicated column) Toledo Blade
Registered Representative UPI
Research Magazine US News and World Report
Resource USA Today
Register Reuters USA TV Network
Rocky Mountain News Value Line
Rukeyser's Business (syndicated column) Wall Street Journal
Sacramento Bee Wall Street Letter
San Diego Tribune Wall Street Week
San Francisco Chronicle Washington Post
San Francisco Examiner WBZ
San Jose Mercury WBZ-TV
Seattle Post-Intelligencer WCVB-TV
Seattle Times WEEI
Street Securities Industry Management WHDH
Smart Money Worcester Telegram
St. Louis Post Dispatch World Wide Web
St. Petersburg Times Worth Magazine
Standard & Poor's Outlook WRKO
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
B-34
<PAGE>
APPENDIX C
ADVERTISING AND PROMOTIONAL LITERATURE
Puget Sound Alternative Investment Series Trust's advertising and promotional
material may include, but is not limited to, discussions of the following
information:
- -- Puget Sound Alternative Investment Series Trust's participation in wrap fee
and no transaction fee programs
- -- Characteristics of the adviser and sub-adviser(s), including the locations
of offices, investment practices and clients
- -- Specific and general investment philosophies, strategies, processes and
techniques
- -- Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services
- -- Industry conferences at which the adviser and sub-adviser(s) participate
- -- Current capitalization, levels of profitability and other financial
information
- -- Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
- -- The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
- -- Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
- -- Current and historical statistics relating to:
- -- total dollar amount of assets managed -Puget Sound Alternative Investment
Series Trust's assets managed in total and by series -the growth of assets
-asset types managed
- -- References may be included in Puget Sound Alternative Investment Series
Trust's advertising and promotional literature about 401(k) and retirement
plans that offer its series.
B-35
<PAGE>
The information may include, but is not limited to:
- -- Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Puget Sound Alternative Investment
Series Trust may or may not have a relationship.
- -- Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the series of Puget
Sound Alternative Investment Series Trust as 401(k) or retirement plan
funding vehicles produced by industry authorities, research organizations
and publications.
B-36
<PAGE>
As filed with the Securities and Exchange
Commission on July 26, 1999
Registration No. 333-50315
File No. 811-8751
================================================================================
Part C
of
Form N-1A
REGISTRATION STATEMENT
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
================================================================================
<PAGE>
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
- --------------------------------------------------------------------------------
PART C
ITEM 23. EXHIBITS.
(1) Agreement and Declaration of Trust of Puget Sound Alternative
Investment Series Trust (the "Trust") - on file (File No. 811-8751
under the Trust's Registration Statement filed on April 16, 1998).
(2) By-Laws of the Trust - on file (File No. 811-8751 under the Trust's
Registration Statement filed on April 16, 1998).
(3) See Article I in the Trust's Declaration of Trust (Exhibit 1 hereto)
and Article XI in the Trusts By-Laws (Exhibit 2).
(4) a. Form of Management Agreement between the Trust and Puget Sound
Asset Management Co., LLC ("PSAM"), relating to Puget Sound Market
Neutral Portfolio, a series of the Trust (the "Fund") on file (File
No. 811-8751 under the Trust's Registration Statement filed on April
16, 1998).
b. Form of Sub-Advisory Agreement between PSAM and Fiduciary Asset
Management Co. ("FAMCO") relating to the Fund - on file (File No.
811-8751 under the Trust's Registration Statement filed on April 16,
1998).
(5) Distribution Agreement between the Trust and First Fund Distributors,
Inc. - Filed herewith.
(6) None.
(7) a. Form of Custodian Agreement between the Trust and Custodial Trust
Company ("CTC") - on file (File No. 811-8751 under Pre-Effective
Amendment No. 1 filed on June 2, 1998).
b. Form of Special Custody Account Agreement by and among the Trust,
CTC and Bear, Stearns Securities Corp. - on file (File No. 811-8751
under Pre-Effective Amendment No.1 filed on June 2, 1998).
(8) a. Form of Organizational Expense Reimbursement Agreement between the
Trust and PSAM - on file (File No. 811-8751 under Pre-Effective
Amendment No. 1 filed on June 2, 1998).
b. Investment Accounting Agreement between the Trust and State Street
Bank and Trust Company - Filed herewith.
<PAGE>
c. Administration Agreement between the Trust and Investment Company
Administration, L.L.C. - Filed herewith.
d. Form of Transfer Agency and Service Agreement between the Trust and
National Financial Data Services, Inc. - Filed herewith.
e. Form of Shareholder Servicing Plan for Investor Shares - on file
(File No. -811-8751 under Pre-Effective Amendment No. 1 filed on June
2, 1998).
(9) Opinion and Consent of Counsel - on file (File No. 811-8751 under
Pre-Effective Amendment No. 2 filed on June 11, 1998).
(10) Independent Auditors' Consent - Not applicable.
(11) Omitted Financial Statements -None.
(12) Initial Capital Agreements - - on file (File No. 811-8751 under
Pre-Effective Amendment No. 2 filed on June 11, 1998).
(13) Form of Distribution Plan for Investor Shares - - on file (File No.
811-8751 under Pre-Effective Amendment No. 1 filed on June 2, 1998).
(14) Financial Data Schedule - No longer required.
(15) 18f-3 Plan - Form of Multi-Class Plan - on file (File No. 811-8751
under Pre-Effective Amendment No. 1 filed on June 2, 1998).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH TRUST.
As of the date of this Amendment to the Registration Statement, there are
no persons controlled by or under common control with the Registrant.
<PAGE>
ITEM 25. INDEMNIFICATION
Article VIII of the Trust's Agreement and Declaration of Trust (Exhibit 1
hereto) and Article 4 of the Trust's By-Laws (Exhibit 2 hereto) provides
for indemnification of its Trustees and officers. The effect of these
provisions is to provide indemnification for each of the Trust's Trustees
and officers against liabilities and counsel fees reasonably incurred in
connection with the defense of any legal proceeding in which such Trustee
or officer may be involved by reason of being or having been a Trustee or
officer, except with respect to any matter as to which such Trustee of
officer shall have been adjudicated not to have acted in good faith in the
reasonable belief that such Trustee's or officer's action was in the best
interest of the Trust, and except that no Trustee or officer shall be
indemnified against any liability to the Trust or its shareholders to which
such Trustee or officer otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Trustee's or officer's office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to Trustees, officers and controlling
persons of the Trust pursuant to the foregoing provisions, or otherwise,
the Trust has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Trust of expenses incurred or paid by a Trustee, officer or
controlling person of the Trust in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or controlling
person in connection with the securities being registered, the Trust will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) PSAM is the investment adviser to the Fund, and its business is
summarized in "Management of the Fund" in the Prospectus. PSAM's members,
directors and officers have been engaged during the past two fiscal years
in the following businesses, professions, vocations or employments of a
substantial nature (former affiliations are marked with an asterisk):
<PAGE>
Name and Office Name and Address of Nature of
with PSAM Other Affiliations Connection
- --------------- ------------------- ----------
Margaret M. Towle Margaret M. Towle Self-Employed
Chief Executive Officer, sole proprietor Consultant
Chief Investment Officer, P.O. Box 11371
Portfolio Manager and Bainbridge Island,
member Washington 98110
*Towle Associates, Inc. Chairman, Chief
One Yesler Building, Suite 200 Executive Officer,
Seattle, Washington 98104 Director and
Secretary
Barry M. Zwick Six Sigma Investment Corp. #102 General Partner
Trustee of member 925 De La Vina Street
Santa Barbara, California 93101
(b) FAMCO is the sub-adviser to the Fund, and its business is summarized in
"Management of the Fund" in the Prospectus. FAMCO's directors and officers have
been engaged during the past two fiscal years in the following businesses,
professions, vocations or employments of a substantial nature (former
affiliations are marked with an asterisk):
Name and Office Name and Address of Nature of
with PSAM Other Affiliations Connection
- -------------- ------------------- ----------
Charles D. Walbrandt None None
President
John L. Dorian None None
Chief Investment Officer -
Equity
Wiley D. Angell None None
Chief Investment Officer -
Fixed Income
John P. Maguire None None
Executive Vice President
Joseph E. Gallagher None None
Vice President
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) First Fund Distributors, Inc. is the principal underwriter for the
following investment companies or series thereof:
Advisors Series Trust
Guinness Flight Investment Funds, Inc.
Fleming Capital Mutual Fund Group
Fremont Mutual Funds
Jurika & Voyles Mutual Funds
Kayne Anderson Mutual Funds
Masters' Select Funds Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Purisima Funds
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
Brandes Investment Funds
Trent Equity Fund
RNC Mutual Fund Group, Inc.
(b) The following information is furnished with respect to the officers of
First Fund Distributors, Inc.:
Name and Principal Position and Offices with Positions and Offices
Business Address* First Fund Distributors, Inc. with Registrant
- ------------------ ----------------------------- ---------------------
Robert H. Wadsworth President and Treasurer None
Steven J. Paggioli Vice President and Secretary Assistant Secretary
Eric M. Banhazl Vice President None
* The principal business address of persons and entities listed is 4455 E.
Camelback Road, Suite 261E, Phoenix, AZ 85018.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by Trust
pursuant to Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are in the possession the Trust's custodian,
CTC, 101 Carnegie Center, Princeton, New Jersey 08540 and the Trust's
transfer agent, National Financial Data Services, Inc. at 330 West 9th
Street, Kansas City, Missouri 64105, except those records relating to
portfolio transactions and the basic organizational and Trust documents of
the Trust (see Subsections (2) (iii), (4), (5), (6), (7), (9), (10) and
(11) of Rule 31a-1(b)), which, with respect to portfolio transactions are
kept by the Fund's Sub-Advisor at 8112 Maryland Avenue, Suite 310, Clayton,
MO and with respect to trust documents by its administrator at 479 West
22nd Street, New York, NY 10011 and 2020 E. Financial Way, Ste. 100,
Glendora, CA 91741.
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 30. UNDERTAKINGS
(a) The undersigned Trust hereby undertakes to call a meeting of
shareholders for the purpose of voting on the removal of a trustee or
trustees when requested in writing to do so by the holders of at least 10%
of the Trust's outstanding voting securities and in connection with such
meeting to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
(b) The Trust hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Trust's latest Annual Report to
shareholders upon request and without charge.
NOTICE
A copy of the Agreement and Declarations of Trust of the Trust is on file
with the Secretary of State of the Commonwealth of Massachusetts and notice is
hereby given that this instrument is executed on behalf of the Trust by an
officer of the Trust as an officer and not individually and the obligations of
or arising out of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Trust has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Seattle and State of Washington on the 26th day of
July, 1999.
PUGET SOUND ALTERNATIVE
INVESTMENT SERIES TRUST
By: /s/ MARGARET M. TOWLE
-------------------------------
Margaret M. Towle
Title: 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.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ MARGARET M. TOWLE Chairman of the Board of July 26, 1999
- ------------------------------- Trustees, President, and
Margaret M. Towle Trustee
*Mary Bechmann Trustee July 26, 1999
- -------------------------------
Mary Bechmann
*John W. Peavy III Trustee July 26, 1999
- -------------------------------
John W. Peavy III
*Joseph C. Pellegrino Trustee July 26, 1999
- -------------------------------
Joseph C. Pellegrino
*By: /s/ MARGARET M. TOWLE
-------------------------------
Margaret M. Towle, Pursuant to Power of Attorney
-- on file (File No. 811-8751 under Pre-Effective
Amendment No. 2 file June 11, 1998)
<PAGE>
As filed with the Securities and Exchange
Commission on July 26, 1999
Registration No. 333-50315
File No. 811-8751
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 1 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3 [X]
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
(Exact name of registrant as specified in charter)
PUGET SOUND ASSET MANAGEMENT CO., LLC
One Yesler Building, Suite 200
Seattle, WA 98104
(Address of principal executive offices)
Registrant's telephone number, including area code:
(206) 405-4100
Exhibits 5, 8(b), 8(c), 8(d)
================================================================================
DISTRIBUTION AGREEMENT
This Agreement made this 1st day of July, 1999 by and between PUGET SOUND
ALTERNATIVE INVESTMENT SERIES TRUST, a Massachusetts business trust (the
"Trust"), and FIRST FUND DISTRIBUTORS, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"); and it is in
the interest of the Trust to offer its shares for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the shares of beneficial
interest of each existing and future series (the "Shares") of the Trust;
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints the Distributor as
exclusive agent to sell and to arrange for the sale of the Shares, on the terms
and for the period set forth in this Agreement, and the Distributor hereby
accepts such appointment and agrees to act hereunder directly and/or through the
Trust's transfer agent in the manner set forth in the Prospectuses (as defined
below). It is understood and agreed that the services of the Distributor
hereunder are not exclusive, and the Distributor may act as principal
underwriter for the shares of any other registered investment company.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
(a) The Distributor agrees to sell the Shares, as agent for the Trust, from
time to time during the term of this Agreement upon the terms described in a
Prospectus. As used in this Agreement, the term "Prospectus" shall mean a
prospectus and statement of additional information included as part of the
Trust's Registration Statement, as such prospectus and statement of additional
information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement most recently
filed from time to time by the Trust with the Securities and Exchange Commission
("SEC") and effective under the Securities Act of 1933 (the "1933 Act") and the
1940 Act, as such Registration Statement is amended by any amendments thereto at
the time in effect. The Distributor shall not be obligated to sell any certain
number of Shares.
(b) Upon commencement of operations of each Trust series, the Distributor
will (i) use best efforts to solicit orders for the sale of the Shares of such
series, (ii) undertake such advertising and promotion as it believes reasonable
<PAGE>
in connection with such solicitation, (iii) hold itself available to receive
orders for the purchase of the Shares of such series, (iv) accept such orders
and (v) transmit such orders and funds received by it in payment for such Shares
as are so accepted to the Trust's transfer agent and/or custodian, as
appropriate, as promptly as practicable. Purchase orders shall be deemed
accepted and shall be effective at the time and in the manner set forth in the
series' Prospectuses. The Distributor shall not make any short sales of Shares.
(c) The offering price of the Shares shall be the net asset value per share
of the Shares, plus the sales charge, if any (determined as set forth in the
Prospectuses). The Trust shall furnish the Distributor, with all possible
promptness, an advice of each computation of net asset value and offering price
of the Shares.
(d) The Distributor shall have the right acting on its own behalf and not
on behalf of the Trust to enter into selected dealer agreements with securities
dealers of its choice ("selected dealers") for the sale of Shares. Shares sold
to selected dealers shall be for resale by such dealers only at the offering
price of the Shares as set forth in the Prospectuses. The Distributor shall
offer and sell Shares only to such selected dealers as are members in good
standing of the NASD.
3. DUTIES OF THE TRUST.
(a) MAINTENANCE OF FEDERAL REGISTRATION. The Trust shall, at its expense,
take, from time to time, all necessary action and such steps, including payment
of the related filing fees, as may be necessary to register and maintain
registration of a sufficient number of Shares under the 1933 Act. The Trust
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a material
fact in a Registration Statement or Prospectus, or necessary in order that there
may be no omission to state a material fact in the Registration Statement or
Prospectus which omission would make the statements therein misleading.
(b) MAINTENANCE OF "BLUE SKY" QUALIFICATIONS. The Trust shall, at its
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
or the Trust series in such states; provided that the Trust shall not be
required to amend its Agreement and Declaration of Trust or By-Laws to comply
with the laws of any state, to maintain an office in any state, to change the
terms of the offering of the Shares in any state, to change the terms of the
offering of the Shares in any state from the terms set forth in Prospectuses, to
qualify as a foreign corporation in any state or to consent to service of
process in any state other than with respect to claims arising out of the
offering and sale of the Shares. The Distributor shall furnish such information
and other material relating to its affairs and activities as may be required by
the Trust or the Trust's series in connection with such qualifications.
2
<PAGE>
(c) COPIES OF REPORTS AND PROSPECTUSES. The Trust shall, at its expense,
keep the Distributor fully informed with regard to its affairs and in connection
therewith shall furnish to the Distributor copies of all information, financial
statements and other papers which the Distributor may reasonably request for use
in connection with the distribution of Shares, including such reasonable number
of copies of Prospectuses and annual and interim reports as the Distributor may
request and shall cooperate fully in the efforts of the Distributor to sell and
arrange for the sale of the Shares and in the performance of the Distributor
under this Agreement.
4. CONFORMITY WITH APPLICABLE LAW AND RULES. The Distributor agrees that in
selling Shares hereunder it and each of its directors, officers, employees,
agents and representatives shall conform in all respects with the laws of the
United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. INDEPENDENT CONTRACTOR. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
The Distributor agrees on behalf of itself and its directors, officers,
employees, agents and representatives to treat confidentially and as proprietary
information of the Trust all records and other information relative to the Trust
and its prior, present or potential shareholders, and not to use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except, after prior notification to and approval in
writing by the Trust, which approval shall not be unreasonably withheld and may
not be withheld where the Distributor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Trust.
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF TRUST. The Distributor agrees to indemnify and hold
harmless the Trust and each of its present or former Trustees, officers,
employees, representatives and each person, if any, who controls or previously
controlled the Trust within the meaning of Section 15 of the 1933 Act against
any and all losses, liabilities, damages, claims or expenses (including the
reasonable costs of investigating or defending any alleged loss, liability,
damage, claim or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
3
<PAGE>
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement, Prospectus, shareholder report or other information
covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
and in conformity with information furnished to the Trust by the Distributor. In
no case (i) is the Distributor's indemnity in favor of the Trust, or any person
indemnified to be deemed to protect the Trust or such indemnified person against
any liability to which the Trust or such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of the Trust's or such person's duties or by reason of reckless disregard of the
Trust's or such person's obligations and duties under this Agreement or (ii) is
the Distributor to be liable under its indemnity agreement contained in this
Paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the nature
of the claim shall have been served upon the Trust or upon such person (or after
the Trust or such person shall have received notice of such service on any
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Trust or any person against whom such action is brought otherwise
than on account of the Distributor's indemnity agreement contained in this
Paragraph.
The Distributor shall be entitled to participate, at its own expense, in
the defense, or, if the Distributor so elects, to assume the defense of any suit
brought to enforce any such claim, but, if the Distributor elects to assume the
defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Trust, and to the persons indemnified as
defendant or defendants, in the suit. In the event that the Distributor elects
to assume the defense of any such suit and retain such legal counsel, the Trust,
and the persons indemnified as defendant or defendants in the suit, shall bear
the fees and expenses of any additional legal counsel retained by them. If the
Distributor does not elect to assume the defense of any such suit, or the Trust
does not approve counsel chosen by the Distributor, the Distributor will
reimburse the Trust and the persons indemnified as defendant or defendants in
such suit for the reasonable fees and expenses of any legal counsel retained by
them. The Distributor agrees to promptly notify the Trust of the commencement of
any litigation or proceedings against it or any of its directors, officers,
employees or representatives in connection with the issue or sale of any Shares.
(b) INDEMNIFICATION OF THE DISTRIBUTOR. The Trust agrees to indemnify and
hold harmless the Distributor and each of its present or former directors,
officers, employees, representatives and each person, if any, who controls or
previously controlled the Distributor within the meaning of Section 15 of the
1933 Act against any and all losses, liabilities, damages, claims or expenses
(including the reasonable costs of investigating or defending any alleged loss,
liability, damage, claim or expense and reasonable legal counsel fees incurred
in connection therewith) to which the Distributor or any such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
4
<PAGE>
may be based upon any wrongful act by the Trust or any of the Trust's Trustees,
officers, employees or representatives who are not directors, officers,
employees, agents or representatives of the Distributor, or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement, Prospectus, shareholder report or other
information covering Shares filed or made public by the Trust or any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading unless such statement or omission was made in
reliance upon and in conformity with information furnished to the Trust by the
Distributor or negligently omitted to be furnished to the Trust by the
Distributor. In no case (i) is the Trust's indemnity in favor of the
Distributor, or any person indemnified to be deemed to protect the Distributor
or such indemnified person against any liability to which the Distributor or
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or negligence in the performance of the Distributor's or such person's
duties or by reason of reckless disregard of the Distributor's or such person's
obligations and duties under this Agreement or (ii) is the Trust to be liable
under its indemnity agreement contained in this Paragraph with respect to any
claim made against the Distributor, or any person indemnified unless the
Distributor, or such person, as the case may be, shall have notified the Trust
in writing of the claim within a reasonable time after the summons or other
first written notification giving information of the nature of the claim shall
have been served upon the Distributor or upon such person (or after the
Distributor or such person shall have received notice of such service on any
designated agent). However, failure to notify the Trust of any such claim shall
not relieve the Trust from any liability which the Trust may have to the
Distributor or any person against whom such action is brought otherwise than on
account of the Trust's indemnity agreement contained in this Paragraph.
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Trust elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Trust and satisfactory
to the Distributor, which approval shall not be unreasonably withheld, and to
the persons indemnified as defendant or defendants, in the suit. In the event
that the Trust elects to assume the defense of any such suit and retain such
legal counsel, the Distributor and the persons indemnified as defendant or
defendants in the suit, shall bear the fees and expenses of any additional legal
counsel retained by them. If the Trust does not elect to assume the defense of
any such suit, the Trust will reimburse the Distributor and the persons
indemnified as defendant or defendants in such suit for the reasonable fees and
expenses of any legal counsel retained by them. The Trust agrees to promptly
notify the Distributor of the commencement of any litigation or proceedings
against it or any of its Trustees, officers, employees or representatives in
connection with the issue or sale of any Shares.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in a Registration Statement or Prospectus filed
with the SEC under the 1933 Act and/or the 1940 Act, covering Shares, as such
Registration Statement and Prospectus may be amended or supplemented from time
5
<PAGE>
to time, or contained in shareholder reports or other material that may be
prepared by or on behalf of the Trust for the Distributor's use. This Section 7,
however, shall not be construed to prevent the Distributor from preparing and
distributing tombstone ads and sales literature or other material as it may deem
appropriate. No person other than the Distributor is authorized to act as
principal underwriter (as such term is defined in the 1940 Act) for the Trust.
8. TERM OF AGREEMENT. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect for a period of one year from the date first
above written. Thereafter, this Agreement shall continue in effect from year to
year, with respect to each series of the Trust subject to the termination
provisions and all other terms and conditions thereof, so long as such
continuation shall be specifically approved at least annually by (i) the Board
of Trustees of the Trust and, (ii) by the vote of a majority of the Trustees of
the Trust who are not interested persons of the Trust and have no direct or
indirect financial interest in the operation of the Trust's Distribution Plan,
this Agreement or any other agreement related to the Distribution Plan, cast in
person at a meeting called for the purpose of voting on such approval. The
Distributor shall furnish to the Trust, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this
Agreement or any extension, renewal or amendment hereof.
9. AMENDMENT OR ASSIGNMENT OF AGREEMENT. This Agreement may not be amended
except as permitted by the 1940 Act, and this Agreement shall automatically and
immediately terminate in the event of its assignment.
10. TERMINATION OF AGREEMENT. This Agreement may be terminated with respect
to any series of the Trust by either party hereto, without the payment of any
penalty, on not more than upon 60 days' nor less than 30 days' prior notice in
writing to the other party; provided, that in the case of termination by any
series of the Trust such action shall have been authorized (i) by resolution of
a majority of the Trustees of the Trust who are not interested persons of the
Trust and have no direct or indirect financial interest in the operations of the
Trust's Distribution Plan, this Agreement or any other agreement related to the
Trust's Distribution Plan, or (ii) by vote of a majority of the outstanding
voting securities of such series of the Trust.
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Agreement and Declaration of Trust or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the Trust
of responsibility for and control of the conduct of the affairs of the Trust.
6
<PAGE>
12. DEFINITION OF TERMS. 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 interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "vote of a majority of the outstanding voting
securities", "interested persons," "assignment," and "affiliated person," as
used in Paragraphs 8, 9 and 10 hereof, shall have the meanings assigned to them
by Section 2(a) of the 1940 Act. In addition, where the effect of a requirement
of the 1940 Act reflected in any provision of this Agreement is relaxed by a
rule, regulation or order of the SEC, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. COMPLIANCE WITH SECURITIES LAWS. The Trust represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act, the 1933
Act and, subject to the provisions of Section 4(d) of this Agreement, all
applicable "Blue Sky" laws. The Distributor agrees to comply with all of the
applicable terms and provisions of the 1934 Act.
14. NOTICES. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor at 4455 E. Camelback Road, Suite 261E, Phoenix,
Arizona 85018 or to the Trust at One Yesler Building, Suite 200, Seattle,
Washington 98104.
15. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this Agreement is executed on behalf of the Trust by an
officer of the Trust as an officer and not individually and the obligations of
or arising out of this separate Agreement are not binding upon any of the
trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property belonging to the Trust.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date first written above.
PUGET SOUND ALTERNATIVE
INVESTMENT SERIES TRUST
By:
------------------------------------
Name:
Title:
FIRST FUND DISTRIBUTORS, INC.
By:
------------------------------------
Name:
Title:
8
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
ADMINISTRATION AGREEMENT
AGREEMENT made this first day of July, 1999 by and between PUGET SOUND
ALTERNATIVE INVESTMENT SERIES TRUST (the "Trust"), a business trust organized
under the laws of the State of Massachusetts, and INVESTMENT COMPANY
ADMINISTRATION, L.L.C. (the "Administrator"), an Arizona limited liability
company.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
l. In General.
The Trust hereby appoints Investment Company Administration L.L.C. as
Administrator, subject to the overall supervision of the Board of Trustees of
the Trust, for the period and on the terms set forth in this Agreement. The
Administrator hereby accepts such appointment and agrees during such period to
render the services herein described and to assume the obligations set forth
herein, for the compensation herein provided.
2. Duties and Obligations of the Administrator.
(a) The Administrator shall be responsible, at its expense, for
providing all administrative services required for the operation of the
Trust and each of its series, including but not limited to corporate
secretarial, treasury, blue sky services and fund accounting services
(except for services that another provider is obligated by written contract
with the Trust to provide to the Trust). Without limiting the generality of
the foregoing, the Administrator shall be responsible for all of the
services listed on Exhibit A.
All services to be furnished by the Administrator under this Agreement
may be furnished through the medium of any such directors, officers or
employees of the Administrator. The Administrator shall perform such other
services for the Trust that are mutually agreed upon by the parties from
time to time. In performing its duties hereunder, the Administrator shall
be obligated to exercise reasonable care and diligence, act in good faith,
use its best efforts and comply with all relevant provisions of the 1940
Act, applicable rules and regulations thereunder, and other applicable law,
the Trust's Declaration of Trust and Bylaws, prospectuses and statements of
additional information and the instructions of the Board of Trustees of the
Trust.
(b) In the absence of willful misfeasance, bad faith, negligence or
reckless disregard of obligations or duties ("disabling conduct") hereunder
on the part of the Administrator (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Administrator) the Administrator shall not be subject
<PAGE>
to liability to the Trust or to any shareholder of the Trust for any act or
omission in the course of, or connected with, rendering services hereunder,
including, without limitation, any error of judgment or mistake of law or
for any loss suffered by any of them in connection with the matters to
which this Agreement relates, except to the extent specified in Section
36(b) of the Investment Company Act of 1940 (the "Act") concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services. Except for such disabling conduct, the Trust
shall indemnify the Administrator (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Administrator) from any liability arising from the
Administrator's conduct under this Agreement to the extent permitted by the
Trust's Declaration of Trust and applicable law.
In order that the indemnification provision contained herein shall
apply, however, it is understood that if in any case the Trust may be asked
to indemnify or hold the Administrator harmless, the Trust shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Administrator will use all
reasonable care to identify and notify the Trust promptly concerning any
situation which presents or appears likely to present the probability of
such a claim for indemnification against the Trust, but failure to do so in
good faith shall not affect the rights hereunder. The Trust shall be
entitled to participate at its own expense or, if it so elects, to assume
the defense of any suit brought to enforce any claims subject to this
indemnity provision. If the Trust elects to assume the defense of any such
claim, the defense shall be conducted by counsel chosen by the Trust and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any
suit and retain counsel, the Administrator shall bear the fees and expenses
of any additional counsel retained by it. If the Trust does not elect to
assume the defense of a suit, it will reimburse the Administrator for the
reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator agrees to indemnify and hold harmless the Trust and
each of its Trustees, officers, employees and shareholders from all claims
and liabilities (including without limitation, liabilities under the
Securities Act of 1933, the Securities Exchange Act of 1934, and the 1940
Act, and any state and foreign securities laws, all as amended from time to
time) and expenses, including (without limitation) reasonable attorneys
fees and disbursements, arising directly or indirectly from any action or
thing which the Administrator takes or does or omits to take or do which is
in violation of this Agreement or not in accordance with instructions
properly given to the Administrator, or arising out of the Administrator's
own willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement.
(c) It is agreed that the Administrator shall have no responsibility
or liability for the accuracy or completeness of the Trust's Registration
Statement under the Act except for information supplied by the
Administrator or negligently omitted by the Administrator for inclusion
therein.
(d) The Administrator shall, for all purposes herein, be deemed to be
an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Trust in
any way and shall not be deemed an agent of the Trust.
2
<PAGE>
3. Allocation of Expenses.
The Administrator agrees that it will furnish the Trust, at the
Administrator's expense, with suitable office space and all necessary facilities
(including facilities for meetings of shareholders and trustees of the Trust),
and equipment and bookkeeping and clerical personnel necessary for carrying out
its duties under this Agreement and for the efficient conduct of the affairs of
the Trust. The Administrator will also pay all compensation and expenses of all
Trustees, officers and employees of the Trust who are affiliated persons of the
Administrator or of any affiliated person of the Administrator. All costs and
expenses of the Trust not expressly assumed by the Administrator under this
Agreement shall be paid by the Trust, including, but not limited to (i) interest
and taxes; (ii) brokerage fees and commissions; (iii) insurance premiums; (iv)
compensation and expenses of the Trust's Trustees and officers other than those
affiliated with the Administrator; (v) legal and auditing fees and expenses;
(vi) fees and expenses of the Trust's custodian, transfer agent and accounting
services agent; (vii) expenses incident to the issuance of the Trust's shares,
including issuance on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Trust or its shares; (ix) expenses of preparing, printing and mailing
reports and notices and proxy material to shareholders of the Trust; (x) all
other expenses incidental to holding meetings of the Trust's shareholders; (xi)
dues or assessments of or contributions to the Investment Company Institute or
any successor; (xii) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto; and (xiii)
organization costs of the Trust.
4. Compensation of the Administrator.
The Trust agrees to pay the Administrator and the Administrator agrees to
accept as full compensation for all services rendered, facilities furnished and
expenses assumed by the Administrator as such, an annual fee, payable monthly,
computed on the value of the net assets of the Trust as of the close of business
each business day as per the attached fee schedule. If this Agreement becomes
effective subsequent to the first day of a month or terminates before the last
day of a month, the Administrator's compensation for that part of the month in
which this Agreement is in effect shall be prorated in a manner consistent with
the calculation of fees as set forth above.
3
<PAGE>
5. Duration and Termination.
(a) This Agreement shall become effective on the date set forth above
and shall remain in force until terminated pursuant to the provisions of
paragraph (b) hereof.
(b) This Agreement may be terminated by the Administrator at any time
without penalty upon giving the Trust not less than sixty (60) days'
written notice (which notice may be waived by the Trust) and may be
terminated by the Trust at any time without penalty upon giving the
Administrator not less than sixty (60) days' written notice (which notice
may be waived by the Administrator), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of all of its
Trustees in office at the time or by the vote of the holders of a majority
(as defined in the Act) of the voting securities of the Trust.
6. Assignment and Amendment.
(a) This Agreement shall not be assignable by either party without the
prior written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
(b) This Agreement may be amended by the parties hereto only if such
amendment is specifically approved (i) by the vote of a majority of the
Trustees of the Trust.
7. Confidentiality.
The Administrator agrees on behalf of itself and its directors, officers,
employees, agents and representatives to treat confidentially and as proprietary
information of the Trust all records and other information relative to the Trust
and all prior, present or potential shareholders of the Trust, and not to use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except, after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Administrator may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Trust. All records required to be maintained and preserved by the
Administrator under this Agreement are property of the Trust and will be
surrendered to the Trust promptly upon request.
8. Governing Law.
This Agreement constitutes the entire agreement and understanding between
the parties hereto, and it shall be governed and construed in accordance with
the laws of the State of Delaware (without regard to conflicts of law).
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<PAGE>
9. Definitions of Certain Items.
The terms "interested person" and "affiliated person," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
10. Notices.
All notices and other communications required or permitted hereunder shall
be in writing and shall be sent by registered or certified mail, postage
prepaid, return receipt requested, or delivered by hand, messenger or overnight
courier, or communicated by telegram, telex or facsimile transmission (with hard
copy sent via regular mail), and shall be deemed given when received at the
addresses set forth below, or at such other address as either party may specify
by written notice to the other.
If to the Administrator, to: Investment Company Administration, L.L.C.
2020 E. Financial Way, Ste. 100
Glendora, California 91741
If to the Trust, to: Puget Sound Alternative Investment
Series Trust
One Yesler Building, Suite 200
Seattle, Washington 98104
Either party may change its address set forth above by giving the other
notice of such change in accordance with the provisions of this Section.
11. Computer Hardware and Software.
Based on a review of the operations of the Administrator and its affiliates
as they relate to the processing, storage and retrieval of data, the
Administrator does not believe that a material adverse change in the ability of
the Administrator to perform its obligations under this Agreement will occur as
a result of computer software and hardware that does not function with respect
to periods commencing January 1, 2000 at lest as effectively as with respect to
periods ending prior to December 31, 1999.
12. Matters relating to the Trust as a Massachusetts Business Trust.
A copy of the Agreement and Declaration of Trust establishing the Trust is
on file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this Agreement is executed on behalf of the Trust by an
officer of the Trust as an officer and not individually and the obligations of
or arising out of this Agreement are not binding upon any of the trustees,
officers or shareholders of the Trust individually but are binding only upon the
assets and property belonging to the Trust.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by duly authorized persons and their seals to be hereunto
affixed, all as of the day and year first above written.
PUGET SOUND ALTERNATIVE
INVESTMENT SERIES TRUST
By:
------------------------------------
ATTEST:
- ------------------------------------
INVESTMENT COMPANY ADMINISTRATION, L.L.C.
By:
------------------------------------
ATTEST:
- ------------------------------------
6
<PAGE>
ADMINISTRATION FEE SCHEDULE
FOR
PUGET SOUND ALTERNATIVE INVESTMENT
SERIES TRUST
ADMINISTRATION SERVICES FEES(1):
Basis Points Average Net Assets for the Complex
------------ ----------------------------------
.05% First $500 million
.03% Assets in Excess of $500 million
Per Fund Annual Minimums(2)
---------------------------
$30,000 Per Fund
$ 5,000 For each additional share class
- ----------
(1) FOR THE FIRST 18 MONTHS, THEN .10% BASIS POINTS FIRST $200 MILLION, .05%
BASIS POINTS NEXT $300 MILLION AND .03% BASIS POINTS THEREAFTER.
(2) FOR THE FIRST 12 MONTHS, THEN $40,000 PER FUND ANNUAL MINIMUM, $15,000 FOR
EACH ADDITIONAL CLASS.
7
<PAGE>
EXHIBIT A
INVESTMENT COMPANY ADMINISTRATION, L.L.C.
ADMINISTRATIVE SERVICES
FOR
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
RESPONSIBILITY FOR BOARD MEETINGS.
* Coordinating the preparation of the agenda.
* Preparing and distributing materials prior to the meeting.
* Preparing minutes of each meeting and maintaining the minute book.
* Advise the Trust and the Board of Trustees on administrative matters as
described in the following list
RESPONSIBILITY FOR SHAREHOLDER MEETINGS.
* Determining when meetings are needed as well as those matters to be voted
on.
* Drafting proxy material.
* Coordinating printing and mailing of proxy material.
* Coordinating proxy solicitation including tabulations of shareholder votes.
* Preparing minutes of the meeting.
COORDINATING THE MAINTENANCE OF THE REGISTRATION STATEMENT.
* Drafting annual revisions and circulating drafts among counsel, the Trust's
advisers, etc.
* Preparing and filing registration statement amendments, supplements
("stickers") and other required documents with the SEC.
* Receiving comments from SEC staff.
* Coordinating printing and mailing of final prospectuses and statements of
additional information.
* Preparing and filing registration fee payments pursuant to Rule 24f-2 and
other applicable rules.
* Filing semi-annual reports on Form N-SAR.
PREPARING SHAREHOLDER REPORTS.
* Drafting reports and circulating drafts.
* Coordinating comments.
8
<PAGE>
* Coordinating printing and distribution.
* Filing with SEC.
MAINTAINING STATE NOTICE FILINGS.
* Monitoring status of filings in each state.
* Increasing amounts filed as needed.
* Filing renewals as needed.
* Filing sales reports and monitor sales.
* Filing copies of registration statement amendments, supplements and other
required documents.
MONITORING COMPLIANCE.
* Monitor the Trust's compliance with respect to the 1940 Act, the Internal
Revenue Code, Board of Trustees and prospectus guidelines, restrictions and
policies.
* Reviewing 1940 Act, IRS, and voluntary investment restrictions with
portfolio managers.
* Preparing checklists for use by portfolio managers.
* Reviewing reports from the accounting services agent.
* Preparing compliance reports for management and the Board.
* Monitoring the adequacy of the fidelity bond and D&O insurance, negotiating
and arranging with insurance carriers of agreements for fidelity bond and
D&O insurance, and making all required filings with government and
regulatory agencies relating to fidelity bond and insurance matters.
* Monitor and advise the Trust regarding its registered investment company
status under the Internal Revenue Code of 1986, as amended.
PREPARING BUDGETS AND CONTROLLING EXPENSES.
* Establishing budgets each year for the accounting services agent.
* Comparing budgeted expenses to actual during the year and revising budgets
as needed.
* Reviewing bills as received and approving for payment by the custodian.
* Calculate expenses and compute total return, expense ratio and portfolio
turnover rate.
* Coordinate with the Trust's fund accountants the computation of the Fund's
SEC yield, including tax equivalent yields and , if required, portfolio
average dollar weighted maturity.
9
<PAGE>
HANDLING SEC INSPECTIONS.
* Meeting SEC staff and gathering data as requested.
* Responding to SEC correspondence resulting from inspections.
OVERSEEING OTHER SERVICE PROVIDERS.
* Acting as management's day-to-day representative with the custodian,
transfer agent (including but not limited to supervising the transfer agent
with respect to the payment of dividends and other distributions to
shareholders), fund accounting agent, auditors, legal counsel, broker
dealers, underwriters, insurers and other service providers.
* Coordinate and supervise the preparation and filing of the Trust's tax
returns by its auditors.
* Monitoring the quality of performance of service providers.
* Provide performance data and act as liaison with industry associations and
reporting services (E.G. Lipper, Morningstar, CDA, etc.).
* Oversee the maintenance by the Trust's custodian and fund accountant of the
books and records maintained by each of them pertaining to the Trust and
maintain such other books and records (other than those required to be
maintained by the Trust's adviser and sub-adviser(s)), at the expense of
the Administrator, as may be required by law to be maintained by the Trust
or may be required for the proper operation of the Trust (which other books
and records shall be the property of the Trust, shall be surrendered
promptly to the Trust upon its request, shall not be permitted to be
inspected by any person without the consent of the Trust and shall be
preserved for the periods required by the 1940 Act).
* Monitor the net asset value per share of each series of the Trust on each
business day, and review and adjust as necessary the Trust's daily expense
accruals.
GENERAL
* Provide the Trust with regulatory reporting, reports regarding investment
performance and other reports reasonably requested by the Trust.
* Provide all other administrative services and functions of the Trust and
each of its series, (except for services that another service provider is
obligated by written contract with the Trust to provide to the Trust).
* Maintaining the Trust's books and records (other than financial or
accounting books and records maintained by any custodian, transfer agent or
accounting services agent)
* Responding to all inquiries or other communications of shareholders, if
any, which are directed to the Administrator, or if any such inquiry or
communication is more properly to be responded to by the Trust's custodian,
transfer agent or accounting services agent, overseeing their response
thereto.
* Authorizing and directing any of the Administrator's directors, officers
and employees who may be elected as Trustees or officers of the Trust to
serve in the capacities in which they are elected.
10
INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT is made effective the 1st day of July, 1999, by and between
STATE STREET BANK AND TRUST COMPANY, a trust company chartered under the laws of
the commonwealth of Massachusetts, having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 ("State Street"),
and PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST, a Massachusetts business
trust, having its principal office and place of business at One Yesler Building,
Suite 200, Seattle, Washington 98104 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint State Street as its agent to perform
certain investment accounting and recordkeeping functions for the assets of the
Fund's investment portfolio or portfolios (each a "Portfolio", and collectively
the "Portfolios"); and
WHEREAS, State Street is willing to accept such appointment on the terms
and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF AGENT. Fund hereby constitutes and appoints State Street as
its agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered investment
company under Rule 31a of the Investment Company Act of 1940, as amended
(the "1940 Act") and to calculate the net asset value of the Portfolios.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to State Street:
1. That it is a trust duly organized and existing and in good
standing under the laws of its state of organization, and that it
is registered under the 1940 Act; and
2. That it has the requisite power and authority under applicable
law, its Declaration of Trust and its By-laws to enter into this
Agreement; it has taken all requisite action necessary to appoint
State Street as investment accounting and recordkeeping agent;
this Agreement has been duly executed and delivered by Fund; and
this Agreement constitutes a legal, valid and binding obligation
of Fund, enforceable in accordance with its terms.
<PAGE>
B. State Street hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of
Massachusetts; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; this Agreement has been duly executed and delivered by
State Street; and this Agreement constitutes a legal, valid and
binding obligation of State Street, enforceable in accordance
with its terms.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
A. DELIVERY OF ACCOUNTS AND RECORDS. Fund will turn over or cause to be
turned over to State Street all accounts and records needed by State
Street to perform its duties and responsibilities hereunder fully and
properly. State Street may rely conclusively on the completeness and
correctness of such accounts and records.
B. ACCOUNTS AND RECORDS. State Street will prepare and maintain, under
the direction of and as interpreted by Fund, Fund's or Portfolio's
accountants and/or other advisors, in complete, accurate and current
form all accounts and records: (1) required to be maintained by Fund
under Section 31(a) of the 1940 Act and the rules and regulations from
time to time adopted thereunder including, without limitation, Rules
31a-1 and 31a-2 under the 1940 Act; (2) required as a basis for
calculation of each Portfolio's net asset value; and (3) as otherwise
agreed upon by the parties. Fund will advise State Street in writing
of all applicable record retention requirements, other than those set
forth in the 1940 Act or the rules thereunder. State Street will
preserve such accounts and records in the manner and for the periods
prescribed in the 1940 Act or for such longer period as is agreed upon
by the parties. Prior to the expiration of such period, Fund may
Instruct State Street regarding disposal of such accounts and records
after the expiration of such period. Fund will furnish, in writing or
its electronic or digital equivalent, accurate and timely information
needed by State Street to complete such accounts and records when such
information is not readily available from generally accepted
securities industry services or publications.
C. ACCOUNTS AND RECORDS PROPERTY OF FUND. State Street acknowledges that
all of the accounts and records maintained by State Street pursuant
hereto are the property of Fund, and will be made available to Fund
for inspection or reproduction within a reasonable period of time,
upon demand. State Street will assist Fund's independent auditors, or
upon the prior written approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but Fund will reimburse State Street for all expenses and
employee time invested in any such review outside of routine and
normal periodic reviews. Upon receipt from Fund of the necessary
information or instructions, State Street will supply information from
the books and records it maintains for Fund that Fund may reasonably
request for Fund's preparation of its annual tax returns,
questionnaires, periodic reports to shareholders, semi-annual
2
<PAGE>
financial statements, semi-annual form N-SAR, financial data necessary
to update form N-1A, proxy statements, and such other reports and
information requests as Fund and State Street may agree upon from time
to time. Except as in the situations explicitly stated in this section
3(C), State Street will keep confidential all books and records and
other information relative to Fund and its shareholders and will not
use any information made available to it hereunder for any purpose
other than to comply with its duties and responsibilities hereunder or
as specifically authorized by Fund in writing.
D. ADOPTION OF PROCEDURES. State Street and Fund may from time to time
adopt such procedures as they agree upon, and State Street may
conclusively assume that no procedure approved or directed by Fund,
Fund's or Portfolio's accountants or other advisors conflicts with or
violates any requirements of the prospectus, the Declaration of Trust
or By-laws of Fund, any applicable law, rule or regulation, or any
order, decree or agreement by which Fund may be bound. Fund will be
responsible for notifying State Street of any changes in statutes,
regulations, rules, requirements or policies which may impact State
Street's responsibilities or procedures under this Agreement or its
related operational policies and procedures as they relate to Fund if
such changes impact Fund in a manner different from or in addition to
requirements applicable to investment companies registered under the
1940 Act in general.
E. VALUATION OF ASSETS. State Street will value the assets of each
Portfolio utilizing the pricing sources designated by Fund ("Pricing
Sources"). In the event that Fund specifies Reuters America, Inc., it
will enter into the Agreement attached hereto as Exhibit A. State
Street will calculate each Portfolio's net asset value in accordance
with the Portfolio's prospectus and Instructions given by Fund. State
Street will provide Fund and its investment adviser with daily
portfolio valuations, net asset value calculations and other standard
operational reports as reasonably requested from time to time.
F. OTHER. Upon Instruction, State Street shall provide facilities to
accommodate audits or examinations of Fund conducted by the Securities
and Exchange Commission or any other governmental or
quasi-governmental entities with jurisdiction.
4. INSTRUCTIONS.
A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which State Street reasonably believes were given by a
designated representative of Fund. Fund will deliver to State Street,
on or prior to the date hereof and thereafter from time to time as
changes therein are necessary, written Instructions naming one or more
designated representatives to give Instructions in the name and on
behalf of Fund, which Instructions may be received and accepted by
State Street as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full
force and effect until receipt by State Street of notice to the
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<PAGE>
contrary. Unless such written Instructions delegating authority to any
person to give Instructions specifically limit such authority to
specific matters or require that the approval of anyone else will
first have been obtained, State Street will be under no obligation to
inquire into the right of such person, acting alone, to give any
Instructions whatsoever. If Fund fails to provide State Street any
such Instructions naming designated representatives, any Instructions
received by State Street from a person reasonably believed to be an
appropriate representative of Fund will constitute valid and proper
Instructions hereunder. The term "designated representative" may
include Fund's or a Portfolio's employees and agents, including
investment managers and their employees.
B. No later than the next business day immediately following each oral
Instruction, Fund will send State Street written confirmation of such
oral Instruction. At State Street's sole discretion, State Street may
record on tape, or otherwise, any oral Instruction whether given in
person or via telephone, each such recording identifying the date and
the time of the beginning and ending of such oral Instruction.
C. Fund will provide upon State Street's request a certificate signed by
an officer or designated representative of Fund, as conclusive proof
of any fact or matter required to be ascertained from Fund hereunder.
Fund will also provide State Street Instructions with respect to any
matter concerning this Agreement requested by State Street. If State
Street reasonably believes that it could not prudently act according
to the Instructions, or the instruction or advice of Fund's or a
Portfolio's accountants or counsel, it may in its discretion, with
notice to Fund, not act according to such Instructions.
5. LIMITATION OF LIABILITY.
A. State Street shall use its best efforts to accurately provide all
services performed hereunder, but it is not responsible or liable for,
and Fund will indemnify and hold State Street harmless from and
against, any and all losses, damages, payments, liabilities and all
reasonable costs, expenses, charges, and counsel fees (excluding
in-house counsel) which may be asserted against or incurred by State
Street or for which State Street may be held to be liable, arising out
of or attributable to:
1. State Street's action or failure to act pursuant hereto; provided that
State Street has acted in good faith and with reasonable care; and
provided further, that in no event is State Street liable for
consequential, special, or punitive damages;
2. State Street's payment of money as requested by Fund, or the taking of
any action required by this Agreement which might make it or its
nominee liable for payment of monies or in any other way, provided
State Street has acted in good faith and with reasonable care;
provided, however, that nothing herein obligates State Street to take
any such action or expend its own monies except in its sole
discretion;
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<PAGE>
3. State Street's action or failure to act hereunder upon any
Instruction, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed, including any Instructions, communications, data or
other information received by State Street by means of the Systems, as
hereinafter defined, or any electronic system of communication,
provided State Street has acted in good faith and with reasonable
care;
4. State Street's action or failure to act in good faith reliance on the
advice or opinion of counsel for Fund with respect to questions or
matters of law, which advice or opinion may be obtained by State
Street at the expense of Fund, or on the Instruction, advice or
statements of any officer or employee of Fund, or Fund's accountants
or other individuals authorized by Fund, provided State Street has
acted in good faith and with reasonable care.
5. Any error, omission, inaccuracy or other deficiency in any Portfolio's
accounts and records or other information provided to State Street by
or on behalf of a Portfolio, including the accuracy of the prices
quoted by the Pricing Sources or for the information supplied by Fund
to value the Assets, or the failure of Fund to provide, or provide in
a timely manner, any accounts, records, or information needed by State
Street to perform its duties hereunder, provided State Street has
acted in good faith and with reasonable care;
6. Fund's refusal or failure to comply with the terms hereof (including
without limitation Fund's failure to pay or reimburse State Street
under Section 5 hereof), Fund's negligence or willful misconduct, or
the failure of any representation or warranty of Fund hereunder to be
and remain true and correct in all respects at all times;
7. The use or misuse, whether authorized or unauthorized, of the Systems
or any electronic system of communication used hereunder by Fund or by
any person who acquires access to the Systems or such other systems
through the terminal device, passwords, access instructions or other
means of access to such Systems or such other system which are
utilized by, assigned to or otherwise made available to Fund, except
to the extent attributable to any negligence or willful misconduct by
State Street; and
8. Loss occasioned by the acts, omissions, defaults or insolvency of any
broker, bank, trust company, securities system or any other person
with whom State Street is Instructed to deal on Fund's behalf.
B. State Street is not responsible or liable for any and all losses,
damages, payments, liabilities, costs, expenses, charges, or counsel
fees which may be asserted against or incurred by Fund or for which
Fund may be held to be liable, arising out of or attributable to the
failure or delay in performance of State Street's obligations
hereunder, or those of any entity for which it is responsible
hereunder, arising out of or caused, directly or indirectly, by any or
all of the following, if out of the affected entities' reasonable
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control: interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or communication
service; inability to obtain equipment or transportation, or a delay
in mails; governmental or exchange action, statute, ordinance,
rulings, regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, freezes, floods, fires,
tornadoes, acts of God or public enemy, revolutions, or insurrection.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay to
State Street the compensation set forth in a separate fee schedule,
incorporated herein by reference, to be agreed to by Fund and State Street
from time to time, and, upon demand, reimbursement for State Street's cash
disbursements and reasonable out-of-pocket costs and expenses, incurred by
State Street in connection with the performance of services hereunder.
7. TERM AND TERMINATION. The initial term of this Agreement is for a period of
one (1) year commencing on the effective date hereof. Thereafter, either
Fund or State Street may terminate this Agreement by notice in writing,
delivered via overnight mail or mailed, postage prepaid, to the other party
and received not less than ninety (90) days prior to the date upon which
such termination will take effect. Upon termination hereof:
A. Fund will pay State Street its fees and compensation due hereunder and
its reimbursable disbursements, costs and expenses paid or incurred to
such date;
B. Fund will designate a successor (which may be Fund) by Instruction to
State Street; and
C. State Street will, upon payment of all sums due to State Street from
Fund hereunder or otherwise, deliver all accounts and records and
other properties of Fund to the successor, or, if none, to Fund, at
State Street's office.
In the event that accounts, records or other properties remain in the
possession of State Street after the date of termination hereof for any
reason other than State Street's failure to deliver the same, State Street
is entitled to compensation as provided in the then-current fee schedule
for its services during such period, and the provisions hereof relating to
the duties and obligations of State Street will remain in full force and
effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at the address set forth above, or at such other address as Fund may
have designated to State Street in writing, will be deemed to have been
properly given to Fund hereunder. Notices, requests, Instructions and other
writings addressed to State Street at the address set forth above,
Attention: Investment Accounting Department, or to such other address as it
may have designated to Fund in writing, will be deemed to have been
properly given to State Street hereunder.
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<PAGE>
9. THE SYSTEMS; CONFIDENTIALITY.
A. If State Street provides Fund direct access to the computerized
investment portfolio recordkeeping and accounting systems used by
State Street ("Systems") or if State Street and Fund agree to utilize
any electronic system of communication, Fund agrees to implement and
enforce appropriate security policies and procedures to prevent
unauthorized or improper access to or use of the Systems or such other
system.
B. Fund will use reasonable care to preserve the confidentiality of the
Systems and the tapes, books, reference manuals, instructions,
records, programs, documentation and information of, and other
materials relevant to, the Systems and the business of State Street or
its affiliates ("Confidential Information"). Fund agrees that it will
use reasonable care not to voluntarily disclose any such Confidential
Information to any other person other than its own employees who
reasonably have a need to know such information pursuant hereto except
as may be required by law or court order. Fund will return all such
Confidential Information to State Street upon termination or
expiration hereof. For purposes of this Agreement, "Confidential
Information" shall not include (a) any information (i) that is or
becomes generally known or publicly available; (ii) that was
rightfully known by or available to Fund or any of its agents or
affiliates on a nonconfidential basis prior to or after disclosure by
State Street to Fund or such agents or affiliates; or (iii) that is
developed by Fund or its agents or affiliates independent of the
disclosure thereof by State Street and is not derived from other
Confidential Information or (b) the records, accounts information or
other data of Fund.
C. Fund has been informed that the Systems are licensed for use by State
Street and its affiliates from one or more third parties
("Licensors"), and Fund acknowledges that State Street and Licensors
have proprietary rights in and to the Systems and all other State
Street or Licensor programs, code, techniques, know-how, data bases,
supporting documentation, data formats, and procedures, including
without limitation any changes or modifications made at the request or
expense or both of Fund (collectively, the "Protected Information").
Fund acknowledges that the Protected Information constitutes
confidential material and trade secrets of State Street and Licensors.
Fund will preserve the confidentiality of the Protected Information,
and Fund hereby acknowledges that any unauthorized use, misuse,
disclosure or taking of Protected Information, residing or existing
internal or external to a computer, computer system, or computer
network, or the knowing and unauthorized accessing or causing to be
accessed of any computer, computer system, or computer network, may be
subject to civil liabilities and criminal penalties under applicable
law. Fund will so inform employees and agents who have access to the
Protected Information or to any computer equipment capable of
accessing the same. Licensors are intended to be and are third party
beneficiaries of Fund's obligations and undertakings contained in this
Section.
D. Fund hereby represents and warrants to State Street that it has
determined to its satisfaction that the Systems are appropriate and
suitable for its use. THE SYSTEMS ARE PROVIDED ON AN AS IS, AS
AVAILABLE BASIS. STATE STREET EXPRESSLY DISCLAIMS ALL WARRANTIES
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, EXCEPT THOSE
WARRANTIES EXPRESSLY STATED HEREIN.
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E. State Street will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available state
of the art technology to offer products that are Year 2000 ready,
including, but not limited to, century recognition of dates,
calculations that correctly compute same century and multi century
formulas and date values, and interface values that reflect the date
issues arising between now and the next one-hundred years, and if any
changes are required, State Street will make the changes to its
products at no cost to the Fund and in a commercially reasonable time
frame and will require third-party suppliers to do likewise.
Similarly, Fund will take reasonable steps to ensure that its
electronic systems reflect the available state of the art technology
and are Year 2000 ready, including, but not limited to, century
recognition of dates, calculations that correctly compute same century
and multi century formulas and date values, and interface values that
reflect the date issues arising between now and the next one-hundred
years, and if any changes are required, Fund will make the changes to
its systems at no cost to State Street and in a commercially
reasonable time frame.
F. In the event of equipment failures, State Street shall, at no
additional expense to Fund, take reasonable steps to minimize service
interruptions. State Street shall make reasonable provisions for (i)
periodic back-up of the computer files and data with respect to Fund
and (ii) emergency use of electronic data processing equipment to
provide services under this Agreement.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio, the
following provisions apply:
A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered hereby,
every reference herein to Fund is deemed to relate solely to the
particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect to
a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document to
memorialize the separate agreement as to each Portfolio is understood
to be for clerical convenience only and will not constitute any basis
for joining the Portfolios for any reason.
B. Fund may appoint State Street as its investment accounting and
recordkeeping agent for additional Portfolios from time to time by
written notice, provided that State Street consents to such addition.
Such additional Portfolios shall be subject to the terms and
provisions hereof except to the extent that such provisions are
modified with respect to such series in writing signed by State Street
and Fund. Rates or charges for each additional Portfolio will be as
agreed upon by State Street and Fund in writing.
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11. MISCELLANEOUS.
A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of the
Commonwealth of Massachusetts, without reference to the choice of laws
principles thereof.
B. All terms and provisions hereof will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The indemnifications extended hereunder, and the provisions of Section
9 hereof are intended to and will continue after and survive the
expiration, termination or cancellation hereof.
D. No provisions hereof may be amended or modified in any manner except
by a written agreement properly authorized and executed by each party
hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions hereof or to enforce any rights resulting from any
breach of any of the terms or conditions hereof, including the payment
of damages, will not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance
or waiver had occurred. No waiver, release or discharge of any party's
rights hereunder will be effective unless contained in a written
instrument signed by the party sought to be charged.
F. The captions herein 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.
G. This Agreement may be executed in two or more counterparts, each of
which is deemed an original but all of which together constitute one
and the same instrument.
H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be considered severable and will not be
affected thereby, and every remaining provision hereof will remain in
full force and effect and will remain enforceable to the fullest
extent permitted by applicable law.
I. The benefits of this Agreement may not be assigned by either party nor
may either party delegate all or a portion of its duties hereunder
without the prior written consent of the other party. Notwithstanding
the foregoing, Fund agrees that State Street may delegate all or a
portion of its duties to an affiliate of State Street, provided that
such delegation will not reduce the obligations of State Street under
this Agreement.
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J. Neither the execution nor performance hereof will be deemed to create
a partnership or joint venture by and between State Street and Fund or
any Portfolio.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder will not
affect any rights or obligations of the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement and all
amendments thereto is on file with the Secretary of State of the state
of its organization; that this Agreement has been executed on behalf
of the trustees of Fund and not individually; and that the obligations
of this Agreement are binding only upon the assets and property of
Fund and not upon any trustee, officer of shareholder of Fund
individually.
M. State Street shall maintain commercially reasonable amounts of (a)
comprehensive general liability insurance coverage and (b) errors and
omissions insurance coverage and notify Fund in the event that such
insurance is canceled. State Street shall notify Fund of any material
claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
STATE STREET BANK AND TRUST PUGET SOUND ALTERNATIVE
COMPANY INVESTMENT SERIES TRUST
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
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EXHIBIT A--REUTERS DATA SERVICE AGREEMENT
The undersigned acknowledges and agrees that some of the data being provided in
the service by State Street to Fund contains information supplied to State
Street by Reuters America Inc. ("Reuters") (the "Data"). Fund agrees that:
(i) although Reuters makes every effort to ensure the accuracy and
reliability of the Data, Fund acknowledges that Reuters, its
employees, agents, contractors, subcontractors, contributors and
third party providers will not be liable for any loss, cost or damage
suffered or incurred by Fund arising out of any fault, interruption
or delays in the Data or out of any inaccuracies, errors or omissions
in the Data however such faults, interruptions, delays, inaccuracies,
errors or omissions arise, unless due to the gross negligence or
willful misconduct of Reuters;
(ii) it will not transfer, transmit, recirculate by digital or analogue
means, republish or resell all or part of the Data; and
(iii) certain parts of the Data are proprietary and unique to Reuters.
The undersigned further agrees that the benefit of this clause will inure to the
benefit of Reuters.
PUGET SOUND ALTERNATIVE
INVESTMENT SERIES TRUST
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
TRANSFER AGENCY AND SERVICE AGREEMENT
between
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
and
NATIONAL FINANCIAL DATA SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
1. Terms of Appointment and Duties...........................................1
2. Third Party Administrators for Defined Contribution Plans ................4
3. Fees and Expenses.........................................................5
4. Representations and Warranties of the Transfer Agent......................5
5. Representations and Warranties of the Fund................................6
6. Wire Transfer Operating Guidelines........................................6
7. Data Access and Proprietary Information...................................8
8. Indemnification..........................................................10
9. Standard of Care.........................................................11
10. Year 2000................................................................11
11. Confidentiality .........................................................11
12. Covenants of the Fund and the Transfer Agent.............................12
13. Termination of Agreement.................................................13
14. Assignment and Third Party Beneficiaries.................................13
15. Subcontractors...........................................................13
16. Miscellaneous............................................................14
17. Additional Funds.........................................................16
18. Limitations of Liability of the Trustees and Shareholders................16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the first day of July, 1999, by and between PUGET SOUND
ALTERNATIVE INVESTMENT SERIES TRUST, a Massachusetts business trust, having its
principal office and place of business at One Yesler Building, Suite 200,
Seattle, Washington 98104 (the "Fund"), and NATIONAL FINANCIAL DATA SERVICES,
INC., a Massachusetts corporation having its principal office and place of
business at 330 West 9th Street, Kansas City, Missouri 64105 (the "Transfer
Agent").
WHEREAS, the Fund is authorized to issue shares of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund intends to initially offer shares in one series, such series
shall be named in the attached Schedule A which may be amended by the parties
from time to time (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Section 17, being herein referred to as a "Portfolio", and collectively as the
"Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Transfer Agent desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT AND DUTIES
1.1 TRANSFER AGENCY SERVICES. Subject to the terms and conditions set forth in
this Agreement, the Fund, on behalf of the Portfolios, hereby employs and
appoints the Transfer Agent to act as, and the Transfer Agent agrees to
act as its transfer agent for the authorized and issued shares of
beneficial interest of the Fund representing interests in each of the
respective Portfolios, no par value, ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with
any accumulation, open-account or similar plan provided to the
shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the prospectus and statement of additional
information as in effect from time to time ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program. In accordance
with procedures established from time to time by agreement between the
Fund on behalf of each of the Portfolios, as applicable, and the Transfer
Agent, the Transfer Agent agrees that it will perform the following
services:
(a) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the Declaration of Trust of
the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(c) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation thereof to the Custodian;
<PAGE>
(d) In respect to the transactions in items (a), (b) and (c) above, the
Transfer Agent shall execute transactions directly with broker-dealers
authorized by the Fund;
(e) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be paid
over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(f) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and distributions declared
by the Fund on behalf of the applicable Portfolio;
(h) Issue replacement certificates for those certificates alleged to have
been lost, stolen or destroyed upon receipt by the Transfer Agent of
indemnification satisfactory to the Transfer Agent and protecting the
Transfer Agent and the Fund, and the Transfer Agent at its option, may
issue replacement certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
(i) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of Shares of the Fund which
are authorized, based upon data provided to it by the Fund, and issued and
outstanding. The Transfer Agent shall also provide the Fund on a regular
basis with the total number of Shares which are authorized and issued and
outstanding and, except as otherwise contemplated hereby, shall have no
obligation, when recording the issuance of Shares, to monitor the legality
of the issuance of such Shares or to take cognizance of any laws relating
to the issue or sale of such Shares, which functions shall be the sole
responsibility of the Fund.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph 1.1, the
Transfer Agent, except as may otherwise be established in accordance with
(e) below, shall perform the following services:
(a) OTHER CUSTOMARY SERVICES. The Transfer Agent shall perform the
customary services of a transfer agent, dividend disbursing agent,
custodian of certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing Shareholder proxy
statements and cards, Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and
other
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appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for all
purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). The Transfer Agent shall
maintain a daily record and produce a daily report for the Fund of all
transactions and receipts and disbursements of money and securities and
deliver a copy of such report for the Fund for each business day to the
Fund no later than 9:00 AM Eastern Time, or such earlier time as the Fund
may reasonably require, on the next business day.
(c) "BLUE SKY" REPORTING. The Fund shall (i) identify to the Transfer
Agent in writing those transactions and assets to be treated as exempt
from blue sky reporting for each State; and (ii) verify the establishment
of transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The responsibility
of the Transfer Agent for the Fund's blue sky State registration status is
solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and providing a system which will enable
the Fund to monitor the total number of Shares sold by each Portfolio in
each State.
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC"). The Transfer
Agent shall (i) accept and effectuate the registration and maintenance of
accounts through Networking and the purchase, redemption, transfer and
exchange of Shares in such accounts through Fund/SERV (networking and
Fund/SERV being programs operated by the NSCC on behalf of NSCC's
participants, including the Fund), in accordance with, instructions
transmitted to and received by the Transfer Agent by transmission from
NSCC on behalf of broker-dealers and banks which have been established by,
or in accordance with the instructions of authorized persons, as
hereinafter defined on the dealer file maintained by the Transfer Agent;
(ii) issue instructions to the Fund's banks for the settlement of
transactions between the Fund and NSCC (acting on behalf of its
broker-dealer and bank participants); (iii) provide account and
transaction information from the affected Fund's records on DST Systems,
Inc. computer system TA2000 ("TA2000 System") in accordance with NSCC's
Networking and Fund/SERV rules for those broker-dealers; and (iv) maintain
Shareholder accounts on TA2000 System through Networking.
(e) NEW PROCEDURES. New procedures as to who shall provide certain of
these services in Section 1 may be established in writing from time to
time by agreement between the Fund and the Transfer Agent. The Transfer
Agent may at times in accordance with any such agreement perform only a
portion of these services and the Fund or its agent may perform these
services on the Fund's behalf.
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<PAGE>
(f) ADDITIONAL TELEPHONE SUPPORT SERVICES. If the parties elect to have
the Transfer Agent provide additional telephone support services under
this Agreement, the parties will agree to such services, fees and
sub-contracting as stated in Schedule 1.2(f) entitled "Telephone Support
Services" attached hereto.
2. THIRD PARTY ADMINISTRATORS FOR DEFINED CONTRIBUTION PLANS
2.1 The Fund may decide to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain plans of deferred compensation ("Plan or
Plans") for the benefit of the individual Plan participant (the "Plan
Participant"), such Plan(s) being qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and administered
by third party administrators which may be plan administrators as defined
in the Employee Retirement Income Security Act of 1974, as amended)(the
"TPA(s)").
2.2 In accordance with the procedures established in the initial Schedule 2.1
entitled "Third Party Administrator Procedures", as may be amended by the
Transfer Agent and the Fund from time to time ("Schedule 2.1"), the
Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the name of the
Trustees, Plans or TPAs, as the case may be, as omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the TPA or its
designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under Section 1 as transfer agent of the Funds
and not as a record-keeper for the Plans.
2.3 Transactions identified under Section 2 of this Agreement shall be deemed
exception services ("Exception Services") when such transactions:
(a) Require the Transfer Agent to use methods and procedures other than
those usually employed by the Transfer Agent to perform services under
Section 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent after the
commencement of the nightly processing cycle of the TA2000 System; or
(c) Require more manual intervention by the Transfer Agent, either in the
entry of data or in the modification or amendment of reports generated by
the TA2000 System than is usually required by non-retirement plan and
pre-nightly transactions.
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3. FEES AND EXPENSES
3.1 FEE SCHEDULE. For the performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees to pay the Transfer Agent an annual maintenance
fee for each Shareholder account as set forth in the attached fee schedule
("Schedule 3.1"). Such fees and out-of-pocket expenses and advances
identified under Section 3.2 below may be changed from time to time
subject to mutual written agreement between the Fund and the Transfer
Agent.
3.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under Section 3.1
above, the Fund agrees to reimburse the Transfer Agent for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Transfer Agent for the items
set out in Schedule 3.1 attached hereto. In addition, any other expenses
incurred by the Transfer Agent at the request or with the consent of the
Fund, will be reimbursed by the Fund.
3.3 POSTAGE. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all shareholder accounts shall be advanced to the Transfer
Agent by the Fund at least seven (7) days prior to the mailing date of
such materials.
3.4 INVOICES. The Fund agrees to pay all fees and reimbursable expenses within
thirty (30) days following the receipt of the respective billing notice,
except for any fees or expenses which are subject to good faith dispute.
In the event of such a dispute, the Fund may only withhold that portion of
the fee or expense subject to the good faith dispute. The Fund shall
notify the Transfer Agent in writing within twenty-one (21) calendar days
following the receipt of each billing notice if the Fund is disputing any
amounts in good faith. If the Fund does not provide such notice of dispute
within the required time, the billing notice will be deemed accepted by
the Fund.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a Massachusetts corporation duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
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4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
5.2 It is empowered under applicable laws and by its Declaration of Trust and
By-Laws to enter into and perform this Agreement.
5.3 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
5.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended, is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
6. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL
CODE
6.1 The Transfer Agent is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute payment orders in
compliance with the Security Procedure and with the Fund instructions on
the execution date provided that such payment order is received by the
customary deadline for processing such a request, unless the payment order
specifies a later time. All payment orders and communications received
after this the customary deadline will be deemed to have been received the
next business day.
6.2 The Fund acknowledges that the Security Procedure it has designated on the
Fund Selection Form was selected by the Fund from security procedures
offered by the Transfer Agent. The Fund shall restrict access to
confidential information relating to the Security Procedure to authorized
persons as communicated to the Transfer Agent in writing. The Fund must
notify the Transfer Agent immediately if it has reason to believe
unauthorized persons may have obtained access to such information or of
any change in the Fund's authorized personnel. The Transfer Agent shall
verify the authenticity of all Fund instructions according to the Security
Procedure.
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6.3 The Transfer Agent shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
6.4 The Transfer Agent reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of the Transfer Agent's
receipt of such payment order; (b) if initiating such payment order would
cause the Transfer Agent, in the Transfer Agent's sole judgement, to
exceed any volume, aggregate dollar, network, time, credit or similar
limits which are applicable to the Transfer Agent; or (c) if the Transfer
Agent, in good faith, is unable to satisfy itself that the transaction has
been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance with the
Security Procedure provided that such requests are received in a timely
manner affording the Transfer Agent reasonable opportunity to act.
However, the Transfer Agent assumes no liability if the request for
amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to detect
any erroneous payment order provided that the Transfer Agent complies with
the payment order instructions as received and the Transfer Agent complies
with the Security Procedure. The Security Procedure is established for the
purpose of authenticating payment orders only and not for the detection of
errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost interest with
respect to the refundable amount of any unauthorized payment order, unless
the Transfer Agent is notified of the unauthorized payment order within
thirty (30) days of notification by the Transfer Agent of the acceptance
of such payment order. In no event (including failure to execute a payment
order) shall the Transfer Agent be liable for special, indirect or
consequential damages, even if advised of the possibility of such damages.
6.8 When the Fund initiates or receives Automated Clearing House credit and
debit entries pursuant to these guidelines and the rules of the National
Automated Clearing House Association and the New England Clearing House
Association, the Transfer Agent will act as an Originating Depository
Financial Institution and/or receiving depository Financial Institution,
as the case may be, with respect to such entries. Credits given by the
Transfer Agent with respect to an ACH credit entry are provisional until
the Transfer Agent receives final settlement for such entry from the
Federal Reserve Bank. If the Transfer Agent does not receive such final
settlement, the Fund agrees that the Transfer Agent shall receive a refund
of the amount credited to the Fund in connection with such entry, and the
party making payment to the Fund via such entry shall not be deemed to
have paid the amount of the entry.
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6.9 Confirmation of Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty four (24) hours notice of which may
be delivered through the Transfer Agent's proprietary information systems,
or by facsimile or call-back. The Fund must report any objections to the
execution of an order within thirty (30) days of receipt of notice of any
such execution.
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Transfer Agent as part of the Fund's
ability to access certain Fund-related data ("Customer Data") maintained
by the Transfer Agent on databases under the control and ownership of the
Transfer Agent or other third party ("Data Access Services") constitute
copyrighted, trade secret, or other proprietary information (collectively
but not including any Customer Data, "Proprietary Information") of
substantial value to the Transfer Agent or other third party. In no event
shall Proprietary Information be deemed Customer Data. The Fund agrees to
treat all Proprietary Information as proprietary to the Transfer Agent and
further agrees that it shall not divulge any Proprietary Information to
any person or organization except as may be provided hereunder or as may
be required pursuant to applicable law or court order. Without limiting
the foregoing, the Fund agrees for itself and its employees and agents,
except as may be required pursuant to applicable law or court order, to:
(a) Use such programs and databases (i) solely on the Fund's computers, or
(ii) solely from equipment at the location agreed to between the Fund and
the Transfer Agent and (iii) solely in accordance with the Transfer
Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in the
normal course of performing processing on the Fund's computer(s)), the
Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained, to
inform the Transfer Agent in a timely manner of such fact and dispose of
such information in accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from the
Transfer Agent's computer to the Fund's terminal to be retransmitted to
any other computer terminal or other device except as expressly permitted
by the Transfer Agent (such permission not to be unreasonably withheld);
(e) Allow the Fund to have access only to those authorized transactions as
agreed to between the Fund and the Transfer Agent; and
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<PAGE>
(f) Honor all reasonable written requests made by the Transfer Agent to
protect at the Transfer Agent's expense the rights of the Transfer Agent
in Proprietary Information at common law, under federal copyright law and
under other federal or state law.
Notwithstanding the foregoing, nothing in this Agreement shall restrict
the ability of the Fund to obtain access to or make copies of, or
otherwise to use or consult freely all Customer Data in the Transfer
Agent's possession or control, or to be read to derogate from the Fund's
sole legal ownership of such Customer Data in accordance with section 31
of the Investment Company Act of 1940, as amended and the Rules
thereunder.
7.2 Proprietary Information shall not include all or any portion of any of the
foregoing items that: (i) are or become publicly available without breach
of this Agreement; (ii) are released for general disclosure by a written
release by the Transfer Agent; or (iii) are already in the possession of
the receiving party at the time of receipt without obligation of
confidentiality to such party or breach of this Agreement.
7.3 The Fund acknowledges that its obligation to protect the Transfer Agent's
Proprietary Information is essential to the business interest of the
Transfer Agent and that the disclosure of such Proprietary Information in
breach of this Agreement would cause the Transfer Agent immediate,
substantial and irreparable harm, the value of which would be extremely
difficult to determine. Accordingly, the parties agree that, in addition
to any other remedies that may be available in law, equity, or otherwise
for the disclosure or use of the Proprietary Information in breach of this
Agreement, the Transfer Agent shall be entitled to seek and obtain a
temporary restraining order, injunctive relief, or other equitable relief
against the continuance of such breach.
7.4 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Transfer Agent shall
endeavor in a timely manner to correct such failure. Organizations from
which the Transfer Agent may obtain certain data included in the Data
Access Services are solely responsible for the contents of such data and
the Fund agrees to make no claim against the Transfer Agent arising out of
the contents of such third-party data, including, but not limited to, the
accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS
IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
7.5 If the transactions available to the Fund include the ability to originate
electronic instructions to the Transfer Agent in order to: (i) effect the
transfer or movement of cash or Shares; or (ii) transmit Shareholder
information or other information, then in such event the Transfer Agent
shall be entitled to rely on the validity and authenticity of such
instruction without undertaking any further inquiry as long as such
instruction is undertaken in conformity with security procedures
established by the Transfer Agent from time to time.
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<PAGE>
7.6 Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 7. The obligations of this Section
shall survive any earlier termination of this Agreement.
8. INDEMNIFICATION
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Transfer Agent, or its agents or subcontractors on: (i)
any information, records, documents, data, stock certificates or services,
which are received by the Transfer Agent or its agents or subcontractors
by machine readable input, facsimile, CRT data entry, electronic
instructions or other similar means authorized by the Fund, and which have
been prepared, maintained or performed by the Fund or any other person or
firm on behalf of the Fund (other than prepared or performed by the
Transfer Agent) including but not limited to any previous transfer agent
or registrar; (ii) any instructions or requests of the Fund or any of its
officers; (iii) any instructions or opinions of legal counsel acceptable
to the Fund with respect to any matter arising in connection with the
services to be performed by the Transfer Agent under this Agreement which
are provided to the Transfer Agent after consultation with such legal
counsel; or (iv) any paper or document, reasonably believed to be genuine,
authentic, or signed by the proper person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be registered or
in violation of any stop order or other determination or ruling by any
federal or any state agency with respect to the offer or sale of such
Shares;
(e) The negotiation and processing of any checks including without
limitation for deposit into the Fund's demand deposit account maintained
by the Transfer Agent; or
(f) Upon the Fund's request entering into any agreements required by the
National Securities Clearing Corporation (the "NSCC") for the transmission
of Fund or Shareholder data through the NSCC clearing systems.
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8.2 In order that the indemnification provisions contained in this Section 8
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Transfer Agent, the Transfer Agent shall
promptly notify the Fund of such assertion, and shall keep the Fund
advised with respect to all developments concerning such claim. The Fund
shall have the option to participate with the Transfer Agent in the
defense of such claim or to defend against said claim in its own name or
in the name of the Transfer Agent in which event the Fund shall have no
further obligation to indemnify the Transfer Agent for any expenses
thereafter incurred by the Transfer Agent in connection with such defense.
The Transfer Agent shall in no case confess any claim or make any
compromise in any case in which the Fund may be required to indemnify the
Transfer Agent except with the Fund's prior written consent.
9. STANDARD OF CARE
9.1 The Transfer Agent shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless said errors
are caused by its negligence, bad faith, or willful misconduct or that of
its employees, except as provided in Section 9.2 below.
9.2 In the case of Exception Services as defined in Section 2.3 herein, the
Transfer Agent shall be held to a standard of gross negligence and
encoding and payment processing errors shall not be deemed negligence.
10. YEAR 2000
The Transfer Agent will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available technology
to offer products that are Year 2000 ready, including, but not limited to,
century recognition of dates, calculations that correctly compute same
century and multi century formulas and date values, and interface values
that reflect the date issues arising between now and the next one-hundred
years, and if any changes are required, the Transfer Agent will make the
changes to its products at a price to be agreed upon by the parties and in
a commercially reasonable time frame and will require third-party
suppliers to do likewise.
11. CONFIDENTIALITY
11.1 The Transfer Agent and the Fund agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporation or other business
organization, any customers' lists, trade secrets, cost figures and
projections, profit figures and projections, or any other secret or
confidential information whatsoever, whether of the Transfer Agent or of
the Fund, used or gained by the Transfer Agent or the Fund during
performance under this Agreement, except as may be required by law or
court order. The Fund and the Transfer Agent further covenant and agree to
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retain all such knowledge and information acquired during and after the
term of this Agreement respecting such lists, trade secrets, or any secret
or confidential information whatsoever in trust for the sole benefit of
the Transfer Agent or the Fund and their successors and assigns. In the
event of breach of the foregoing by either party, the remedies provided by
Section 7.3 shall be available to the party whose confidential information
is disclosed. The above prohibition of disclosure shall not apply to the
extent that the Transfer Agent must disclose such data to its
sub-contractor or Fund agent for purposes of providing services under this
Agreement.
11.2 In the event that any requests or demands are made for the inspection of
the Shareholder records of the Fund, other than request for records of
Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the Transfer
Agent will use its best efforts to notify the Fund and endeavor to secure
instructions from an authorized officer of the Fund as to such inspection.
The Transfer Agent expressly reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by counsel that
it may be held liable for the failure to exhibit the Shareholder records
to such person or if required by law or court order.
12. COVENANTS OF THE FUND AND THE TRANSFER AGENT
12.1 The Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the execution
and delivery of this Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
12.3 The Transfer Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the Rules thereunder, the Transfer Agent agrees that all
such records prepared or maintained by the Transfer Agent relating to the
services to be performed by the Transfer Agent hereunder are the property
of the Fund and will be preserved, maintained and made available in
accordance with such Section and Rules, and will be surrendered promptly
to the Fund on and in accordance with its request.
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13. TERMINATION OF AGREEMENT
13.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
13.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund. Additionally, the Transfer Agent reserves the right to
charge for any other reasonable expenses associated with such termination.
Payment of such expenses or costs shall be in accordance with Section 3.4
of this Agreement.
13.3 Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder, other than materials or
information required to be retained by such party under applicable laws or
regulations.
14. ASSIGNMENT AND THIRD PARTY BENEFICIARIES.
14.1 Except as provided in Section 15.1 below and the Additional Telephone
Support Services Schedule 1.2(f) attached, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party. Any attempt to do so in violation
of this Section shall be void. Unless specifically stated to the contrary
in any written consent to an assignment, no assignment will release or
discharge the assignor from any duty or responsibility under this
Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in this
Agreement to anyone other than the Transfer Agent and the Fund, and the
duties and responsibilities undertaken pursuant to this Agreement shall be
for the sole and exclusive benefit of the Transfer Agent and the Fund.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a partnership or joint
venture between the Transfer Agent and the Fund. Other than as provided in
Section 15.1 and Schedule 1.2(f), neither party shall make any commitments
with third parties that are binding on the other party without the other
party's prior written consent.
15. SUBCONTRACTORS
15.1 The Transfer Agent may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)"), or (ii)
a BFDS subsidiary or affiliate duly registered as a transfer agent
pursuant to Section 17A(c)(2); provided, however, that the Transfer Agent
shall be fully responsible to the Fund for the acts and omissions of BFDS
or any of its subsidiaries or affiliates as it is for its own acts and
omissions.
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15.2 Nothing herein shall impose any duty upon the Transfer Agent in connection
with or make the Transfer Agent liable for the actions or omissions to act
of unaffiliated third parties such as by way of example and not
limitation, Airborne Services, Federal Express, United Parcel Service, the
U.S. Mails, the NSCC and telecommunication companies, provided, if the
Transfer Agent selected such company, the Transfer Agent shall have
exercised due care in selecting the same.
16. MISCELLANEOUS
16.1 AMENDMENT. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
16.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.3 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control and not the result
of its negligence or misfeasance, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
16.4 CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or
failure to act hereunder.
16.5 SURVIVAL. All provisions regarding indemnification, warranty, liability,
and limits thereon, and confidentiality and/or protections of proprietary
rights and trade secrets shall survive the termination of this Agreement.
16.6 SEVERABILITY. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
16.7 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or ambiguity
between the terms and conditions contained in this Agreement and any
Schedules or attachments hereto, the terms and conditions contained in
this Agreement shall take precedence.
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16.8 WAIVER. No waiver by either party or any breach or default of any of the
covenants or conditions herein contained and performed by the other party
shall be construed as a waiver of any succeeding breach of the same or of
any other covenant or condition.
16.9 MERGER OF AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect
to the subject matter hereof whether oral or written.
16.10 COUNTERPARTS. This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
16.11 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other
similar process. The parties hereto each agree that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the regular course
of business, and that any enlargement, facsimile or further reproduction
shall likewise be admissible in evidence.
16.12 NOTICES. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, or by facsimile addressed as follows or to such other address or
addresses of which the respective party shall have notified the other.
(a) If to National Financial Data Services, Inc., to:
National Financial Data Services, Inc.
330 West 9th Street
Kansas City, Missouri 64105
Attention: President
Facsimile: (816) 843-8652
(b) If to the Fund, to:
Puget Sound Alternative Investment Series Trust
One Yesler Building, Suite 200
Seattle, WA 98104 Attention:
Facsimile:__________
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17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the attached series of shares listed on Schedule A with
respect to which it desires to have the Transfer Agent render services as
transfer agent under the terms hereof, it shall so notify the Transfer
Agent in writing, and if the Transfer Agent agrees in writing to provide
such services, such series of Shares shall become a Portfolio hereunder.
18. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or Shareholders individually but
are binding only upon the assets and property of the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
PUGET SOUND ALTERNATIVE
INVESTMENT SERIES TRUST
BY:
------------------------------------
ATTEST:
- ------------------------------------
NATIONAL FINANCIAL DATA SERVICES, INC.
BY:
------------------------------------
Senior Vice President
ATTEST:
- ------------------------------------
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SCHEDULE A
Dated July 1, 1999 to Transfer Agency Agreement dated July 1, 1999
Puget Sound Money Neutral Portfolio
Institutional Shares
Investor Shares
PUGET SOUND ALTERNATIVE NATIONAL FINANCIAL DATA
TRUSTSERVICES, INC. INVESTMENT SERIES
BY: BY:
------------------------------- -------------------------------
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated July 1, 1999 to Transfer Agency Agreement dated July 1, 1999
1. On each Business Day, the TPA(s) shall receive, on behalf of and as agent
of the Fund(s), Instructions (as hereinafter defined) from the Plan.
Instructions shall mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the redemption of
Shares; in each case based on the Plan's receipt of purchase orders and
redemption requests by Participants in proper form by the time required by
the term of the Plan, but not later than the time of day at which the net
asset value of a Fund is calculated, as described from time to time in
that Fund's prospectus. Each Business Day on which the TPA receives
Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such Instructions,
to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1),
the TPA(s) shall notify the Transfer Agent of the net amount of such
purchases or redemptions, as the case may be, for each of the Plans. In
the case of net purchases by any Plan, the TPA(s) shall instruct the
Trustees of such Plan to transmit the aggregate purchase price for Shares
by wire transfer to the Transfer Agent on (TD+1). In the case of net
redemptions by any Plan, the TPA(s) shall instruct the Fund's custodian to
transmit the aggregate redemption proceeds for Shares by wire transfer to
the Trustees of such Plan on (TD+1). The times at which such notification
and transmission shall occur on (TD+1) shall be as mutually agreed upon by
each Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and price
for all transactions, and Share balances. The TPA(s) shall maintain on
behalf of each of the Plans a single master account with the Transfer
Agent and such account shall be in the name of that Plan, the TPA(s), or
the nominee of either thereof as the record owner of Shares owned by such
Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of Shares
and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that Plan
as of the statement closing date, purchases and redemptions of Shares by
the Plan during the period covered by the statement, and the dividends and
other distributions paid to the Plan on Shares during the statement period
(whether paid in cash or reinvested in Shares).
<PAGE>
7. The TPA(s) shall, at the request and expense of each Fund, transmit to the
Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to
each Fund or any agent designated by it such periodic reports covering
Shares of each Plan as each Fund shall reasonably conclude are necessary
to enable the Fund to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders and
redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses,
proxy materials, periodic reports and other materials relating to each
Fund be furnished to Participants in which event the Transfer Agent or
each Fund shall mail or cause to be mailed such materials to Participants.
With respect to any such mailing, the TPA(s) shall, at the request of the
Transfer Agent or each Fund, provide at the TPA(s)'s expense complete and
accurate set of mailing labels with the name and address of each
Participant having an interest through the Plans in Shares.
PUGET SOUND ALTERNATIVE NATIONAL FINANCIAL DATA
INVESTMENT SERIES TRUST SERVICES, INC.
BY: BY:
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<PAGE>
SCHEDULE 3.1
Dated July 1, 1999 to Transfer Agency Agreement dated July 1, 1999
National Financial Data Services, Inc.
Fee Information for Services as Plan, Transfer and Dividend Disbursing Agent
Puget Sound Alternative Investment Series Trust
Effective July 1, 1999 through June 30, 2000
- --------------------------------------------------------------------------------
ACCOUNT MAINTENANCE FEES
Account Fee (per open account within a funds) $ 14.00 per year
Closed Account Fee (per closed account) $ 2.40 per year
BASE FEE PER FUND (CUSIP)
Retail Class (per CUSIP) $25,200 per year
Institutional Class (per CUSIP) $15,000 per year
Base Fee will be reduced the first year as follows*:
FEE PER MONTH RETAIL INSTITUTIONAL
- ------------- ------ -------------
Months 1-4 $1,200 $ 750
Months 5-8 $1,500 $ 950
Months 9-12 $1,800 $1,125
Month 13- thereafter $2,100 $1,250
*The Base Fee reduction offered in the first year will be subject to full
reimbursement should the transfer agency relationship be terminated within three
years.
ACTIVITY FEES
New Account Set Up $ 4.00 each
Manual Financial Transactions $ 1.50 each
Manual Maintenance Transactions $ .75 each
Shareholder/Dealer Telephone Calls (received /placed) $ 3.00 each
Letters to Shareholders/Dealers $ 3.00 each
Checkwriting Drafts Presented for Payment $ 1.00 each
Checkwriting Set-Up $ 5.00 each
NEW FUND IMPLEMENTATION FEE $1,500.00 per cusip
NSCC INTERFACE (annual charge) $1,500.00 per cusip
FIDUCIARY ADMINISTRATION FEES
Account
Maintenance Fee (per Tax ID, per plan, paid by shareholder) $12.00 per year
Set-Up Fee (per account) $ 5.00
<PAGE>
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses are billed as incurred and include, but are not limited
to: costs associated with mileage calculations, mailing expenses (i.e.,
statements, stationery, checks, certificates, sales literature, printing,
postage, etc.), telecommunication expenses, equipment and software expenses
(client-site only), programming expenses (i.e., charges necessary to establish
consolidated statement), microfiche, freight, ACH bank charges, and all other
expenses incurred on the fund's behalf.
PUGET SOUND ALTERNATIVE INVESTMENT NATIONAL FINANCIAL DATA SERVICES, INC.
SERIES TRUST
BY: BY:
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TITLE: TITLE:
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DATE: DATE:
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