As filed with the Securities and Exchange Commission on July 1, 1998
Securities Act Registration No. 333-
Investment Company Act Registration No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __
Post-Effective Amendment No. __
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. __
T.O. RICHARDSON TRUST
(Exact Name of Registrant as Specified in Charter)
Two Bridgewater Road
Farmington, Connecticut 06032-2256
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (860) 677-8578
Samuel Bailey, Jr.
T.O. Richardson Company, Inc.
Two Bridgewater Road
Farmington, Connecticut 06032-2256
(Name and Address of Agent for Service)
Copies to:
David M. Leahy, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
<PAGE>
Approximate date of proposed public offering: As soon as practicable after the
Registration Statement becomes effective.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and the Statement
of Additional Information of the responses to the Items of Parts A and B of Form
N-1A).
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Investor Expenses; Highlights
3. Condensed Financial Information *
4. General Description of Registrant Investment Objective and Policies;
Fundamental Investment Restrictions
5. Management of the Fund Fund Management
5A. Management's Discussion of Fund *
Performance
6. Capital Stock and Other Securities Highlights; Dividends, Capital Gains
Distributions and Tax Treatment
7. Purchase of Securities Being How to Purchase Shares; Exchange
Offered Privilege; Determination of Net Asset
Value
8. Redemption or Repurchase How to Redeem Shares; Exchange
Privilege; Determination of Net Asset
Value
9. Pending Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objectives and Investment Restrictions; Investment
Policies Policies and Techniques; Fund
Transactions and Brokerage
14. Management of the Fund Trustees and Officers; Investment
Adviser
1
<PAGE>
15. Control Persons and Principal Principal Shareholders; Trustees and
Holders of Securities Officers
16. Investment Advisory and Other Investment Adviser; Distributor;
Services Custodian; Transfer Agent and Dividend-
Disbursing Agent; Independent
Accountants
17. Brokerage Allocation and Other Fund Transactions and Brokerage
Practices
18. Capital Stock and Other Securities The Fund and Description of the Trust
19. Purchase, Redemption and Pricing Included in Prospectus under the heading
of Securities Being Offered How to Purchase Shares; How to
Redeem Shares; Exchange Privilege;
Determination of Net Asset Value; and in
the Statement of Additional Information
under the heading Distributor
20. Tax Status Included in Prospectus under the heading
Dividends, Capital Gains Distributions
and Tax Treatment; and in the Statement
of Additional Information under the
heading Taxes
21. Underwriters Distributor
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of the Registration Statement.
- -----------------------------
* Answer negative or inapplicable.
2
<PAGE>
Subject to completion, dated _________ __, 1998
PROSPECTUS
dated , 1998
T.O. RICHARDSON TRUST
T.O. Richardson Sector Rotation Fund
Two Bridgewater Road
Farmington, Connecticut 06032-2256
[1-888- ]
The investment objective of the T.O. Richardson Sector Rotation Fund
(the "Fund") is to seek capital appreciation while also providing some
protection against down markets. The Fund's investment adviser uses a
proprietary quantitative model to allocate assets among mainly equity securities
of companies within particular sectors (i.e., industries) or groups of sectors
it determines have the greatest potential for market appreciation. Under normal
market conditions the Fund expects to be invested in five or more sectors, with
each sector represented by investment in the equity securities of at least five
issuers.
------------------------
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION DOES
NOT GUARANTEE THAT INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE NOR
HAS IT JUDGED THIS FUND FOR INVESTMENT MERIT. IT IS A CRIMINAL OFFENSE TO STATE
OTHERWISE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or under the
securities laws of any such State.
3
<PAGE>
TABLE OF CONTENTS
Page No.
HIGHLIGHTS.........................................................
SECTOR DESCRIPTIONS................................................
IMPLEMENTATION OF POLICIES AND RISKS...............................
FUND MANAGEMENT....................................................
HOW TO PURCHASE SHARES.............................................
DETERMINATION OF NET ASSET VALUE...................................
HOW TO REDEEM SHARES...............................................
EXCHANGE PRIVILEGE.................................................
INDIVIDUAL RETIREMENT ACCOUNTS.....................................
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT...........
YEAR 2000 ISSUE....................................................
FUND PERFORMANCE...................................................
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the SAI, and
if given or made, such information or representations may not be relied upon as
having been authorized by the Fund. This Prospectus does not constitute an offer
to sell securities in any state or jurisdiction in which such offering may not
lawfully be made.
4
<PAGE>
HIGHLIGHTS
The Fund's Investment Objectives and Goals
The investment objective of the Fund is to seek capital appreciation
while providing some protection against down markets. The Fund's Adviser uses a
proprietary quantitative model to allocate assets among mainly equity securities
of companies' within particular sectors (i.e., industries) or groups of sectors
it determines have the greatest potential for market appreciation based upon the
relative strength of the sectors and the general stock market. As with any
mutual fund, there is no assurance that the Fund will achieve its goal. The
Fund's investment objective may be changed by the Trustees without shareholder
approval; however, prior to any such change, shareholders would be given notice.
Principal Investment Strategies of the Fund
Under normal market conditions, the Fund expects to be invested in five
or more sectors, with each sector represented by investment in the equity
securities of at least five issuers. The average market capitalization of the
issuers in whose securities the Fund expects to invest will vary widely over
sectors. Certain sectors may overlap. For example, Computers and Electronics,
Business Services and Financial Services, and Natural Resources and Basic
Materials. The Fund expects to exit sectors that are underperforming the general
stock market and to purchase securities of issuers in higher ranked sectors.
During periods when most sectors are underperforming the returns of money market
instruments, the Fund expects to exit sectors that are underperforming money
market returns and invest in other sectors, if any, that are performing better
than such money market funds or short-term money market instruments or in such
money market funds or short-term money market instruments until such sectors
turn positive. The Fund expects to invest in leading industry sectors that the
Adviser determines have the greatest potential for market appreciation during
each market phase.
The sectors in which the Fund may invest include, but are not limited
to:
<TABLE>
<CAPTION>
<S> <C> <C>
Basic Materials Financial Services Natural Resources
Biotechnology Food and Agriculture Precious Metals and
Minerals
Business Services Health Care Retailing
Computers Health Care Services Software and Computer
Services
Cyclical Industries Industrial Equipment Technology
Electronics Leisure Telecommunications
1
<PAGE>
Energy Medical Equipment and Transportation
Systems
Energy Services Multimedia Utilities
Environmental Services Natural Resources
</TABLE>
The Fund offers investors an approach to equity investing with an
investment process that provides some downside protection. The Fund employs
proprietary quantitative processes to select sectors of the economy with strong
relative strength profiles and exits sectors that are in decline. The Fund's
Adviser believes that limiting losses is as important to building capital as
maximizing gains. The Adviser's approach to management of the Fund combines
exposure to rising markets and industry sectors with a process for capital
preservation in falling markets and sectors.
A portion of Fund assets may be held in short-term money market
securities and cash to pay redemption requests and expenses of the Fund. Under
unusual circumstances and as a defensive technique, the Fund may retain a larger
portion of cash and/or money market instruments deemed by the Adviser to be
consistent with a temporary defensive posture. Although the Fund would do this
only in seeking to avoid losses, it could have the effect of reducing the
benefit from any upswing in the market.
Principal Risks of Investing in the Fund
The Fund is suitable for long-term investors only and is not designed
as a short-term investment. The Fund can be volatile over the short-term. The
share price of the Fund will fluctuate and may, at redemption, be worth more or
less than the initial purchase price. You could lose money. Investors in the
Fund will be exposed to market risks associated with investments in equity
securities. Market risks associated with equity securities include the
possibility that stock prices in general will decline over short or even
extended periods. This risk is in addition to the risks inherent in individual
stock selections.
Other risks associated with investment in the Fund include:
<TABLE>
<CAPTION>
<S> <C> <C>
- Opportunity Risk: An investment opportunity may be missed because
the assets necessary to take advantage of the
opportunity are deployed in less advantageous
investments.
- Management Risk: A strategy used by the Adviser may fail to produce the
intended result.
- Liquidity Risk: Certain securities may be difficult or impossible to sell
at the time and price that the Fund seeks.
</TABLE>
See "Implementation of Policies and Risks."
2
<PAGE>
Investor Expenses
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
Shareholder Fees (Fees Paid Directly From Your Investment)
Maximum Sales Load Imposed on Purchases................................None
Maximum Deferred Sales Load............................................None
Maximum Sales Load Imposed on Reinvested Dividends.....................None
Redemption Fee.........................................................None(1)
Exchange Fee...........................................................None(2)
Annual Fund Operating Expenses (expenses deducted from Fund assets as a
percentage of average net assets)
Management Fees 1.50%
Rule 12b-1 or Service Fees None
Other Expenses ____%(3)
Total Annual Fund Operating Expenses ____%
- ------------------
(1) Shareholders who choose to redeem shares by wire may be charged a $12
service fee. The Fund assesses a contingent redemption fee of 1.25% on
redemptions of Fund shares held for less than one year. This contingent
redemption fee is waived for Fund shareholders who, immediately prior
to their investment in the Fund, were previously private clients of the
Adviser. See "How to Redeem Shares."
(2) While there is no charge for written requests to exchange Fund shares
for shares of the Firstar Money Market Funds, Firstar charges a $5.00
fee for each exchange transaction executed by telephone. See "Exchange
Privilege".
(3) Based on estimated amounts for the Fund's initial fiscal year.
Example
This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. 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 upon these assumptions your costs would be:
1 year 3 years
3
<PAGE>
$---------- $------------
You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years
$---------- $---------- $---------- $----------
Understanding Expenses
Operating a mutual fund involves a variety of expenses for portfolio management,
shareholder statements, tax reporting, and other services. These expenses are
paid from the Fund's assets and their effect is already factored into any quoted
share price or return.
The Adviser
T.O. Richardson Company, Inc. (the "Adviser") serves as investment adviser
to the Fund. The Adviser has been serving clients since 1967, applying
proprietary quantitative investment strategies to a complete range of clients'
financial objectives. "Winning by Not Losing" (r) is the Adviser's approach to
achieving superior long term returns with consistent emphasis on capital
preservation for risk averse individuals, institutions, endowments and pension
plans. As of May 31, 1998, the Adviser managed approximately $220 million. See
"Prior Performance of the Adviser" and "Fund Organization and Management."
How to Purchase and Redeem Shares
Shares of the Fund are offered at net asset value per share and are
sold without a sales charge. See "How to Purchase Shares" for more details. The
minimum initial investment required by the Fund is $5,000 ($2,000 for IRAs), The
minimum subsequent investment is $500. The minimum initial investment for
investors using the Automatic Investment Plan is $1,000 with a minimum monthly
investment of $100. These minimums may be changed or waived at any time by the
Fund. See "How to Purchase Shares."
Shares may be redeemed either in writing or by telephone following the
procedures under "How to Purchase Shares." The Fund is not designed for
short-term traders and, as such, imposes a contingent redemption fee of 1.25% if
shares are redeemed within one year of purchase. See "How to Redeem Shares."
The Policy Regarding Dividends And Other Distributions
4
<PAGE>
The policy of the Fund is to distribute substantially all ordinary income
and net realized capital gains annually. See "Dividends, Capital Gains
Distributions and Tax Treatment."
Additional Information
General inquiries regarding the Fund can be directed to either your
investment professional or the Fund at the address and telephone number on the
front page of this Prospectus.
A Statement of Additional Information (the "SAI") for the Fund, dated
_____________ ___, 1998, contains further information and is incorporated by
reference into this Prospectus. The SAI has been filed with the Securities and
Exchange Commission (the "SEC"). The SAI, which may be revised from time to
time, is available without charge upon request to the above address or telephone
number.
SECTOR DESCRIPTIONS
The sectors in which the Fund may invest are described below.
Basic Materials
These sectors include companies engaged in the manufacture, mining,
processing, or distribution of raw materials and intermediate goods used in
building and manufacturing. These materials and goods may include chemicals,
metals, textiles, and wood products. These sectors also consists of companies
involved in mining, processing, transportation, and distribution, including
companies involved in equipment supplies and railroads.
Many companies in the industrial sectors are significantly affected by
the level and volatility of commodity prices, the exchange value of the dollar,
import, controls, and worldwide completion. At times, worldwide production of
industrial materials has exceeded demand as a result of over-building or
economic downturns, leading to poor investment returns or losses. Other risks
may include liability for environmental damage, depletion of resources, and
mandated expenditures for safety and pollution control.
Biotechnology
This sector consists of companies engaged in the research, development,
and manufacture of various biotechnological products, services, and processes.
These companies may include companies involved with new or experimental
technologies such as genetic engineering. The sector also includes companies
that manufacture and/or distribute biotechnological and biomedical products.
Some biotechnology companies may provide processes or services instead of, or in
addition to, products.
5
<PAGE>
Biotechnology companies are affected by patent considerations, intense
competition, rapid technological change and obsolescence, and regulatory
requirements. In addition, many of these companies may not yet offer products
and may have persistent losses or erratic revenue patterns.
Business Services
These sectors include companies that provide business-related services
to companies and other organizations. Business-related services may include data
processing, consulting, outsourcing, temporary employment market research or
data base services, printing, advertising, computer programming, credit
reporting, claims collection, mailing and photocopying.
The success of companies that provide business-related services is
subject to continued demand for such services as companies and other
organizations seek alternative, cost-effective means to meet their economic
goals. Competitive pressures, such as technological developments, fixed rate
pricing, and the ability to attract and retain skilled employees, also may have
an impact on the financial condition of companies in the business services and
outsourcing industry.
Computers
This sector consists of companies engaged in the research, design,
development, manufacture, or distribution of products, processes, or services
that relate to currently available or experimental hardware technology within
the computer industry. This sector also includes companies that provide products
or services such as computer and office equipment wholesalers, software
retailers, data processors, robotics, and designers of artificial intelligence.
Competitive pressures and changing domestic and international demand
may have a significant effect on the financial condition of companies in the
computer industry. Companies in the computer industry spend heavily on research
and development and are sensitive to the risk of product obsolescence.
Cyclical Industries
These sectors include companies engaged in the research, development,
manufacture, distribution, supply, or sale of materials, equipment, products or
services related to cyclical industries. These may include the automotive,
chemical, construction and housing, defense and aerospace, environmental
services, industrial equipment and materials, paper and forest products, and
transportation industries.
Many companies in these industries are significantly affected by
general economic trends including employment, economic growth, and interest
rates. Other factors that may affect these industries are changes in consumer
sentiment and spending, commodity prices, legislation, government regulation and
spending, import controls, and worldwide competition. At times, worldwide
production of the materials
6
<PAGE>
used in cyclical industries has exceeded demand as a result of over-building or
economic downturns. During these times, commodity price declines and unit volume
reductions resulted in poor investment returns and losses. A company in the
cyclical industries may be subject to liability for environmental damage,
depletion of resources, and mandated expenditures for safety and pollution
control.
Electronics
This sector consists of companies engaged in the design, manufacture,
or sale of electronic components (semiconductors, connectors, printed circuit
boards, and other components); equipment vendors to electronic component
manufacturers; electronic component distributors; and electronic instruments and
electronic systems vendors. This may include companies involved in all aspects
of the electronics business and in new technologies or speciality areas such as
defense electronics, advanced design and manufacturing technologies, or lasers.
Many of the products offered by companies engaged in the design, production, or
distribution of electronic products are subject to risks of rapid obsolescence
and intense competition.
Energy
This sector consists of companies in the energy field, including the
conventional areas of oil, gas, electricity, and coal, and alternative sources
of energy such as nuclear, oil shale, and solar power. The Fund may invest in
companies that produce, transmit, market, distribute or provide products and
services to companies in the energy field; and companies involved in the
exploration of new sources of energy, conservation, and energy-related pollution
control.
Securities of companies in the energy field are subject to changes in
value and dividend yield which depend largely on the price and supply of energy
fuels. Swift price and supply fluctuations may be caused by events relating to
international politics, energy conservation, the success of exploration
projects, and tax and other governmental regulatory policies.
Energy Services
This sector consists of companies in the energy service field,
including those that provide services and equipment to the conventional areas of
oil, gas, electricity, and coal, and newer sources of energy such as nuclear,
geothermal, oil shale, and solar power. The Fund may invest in companies
providing services such as onshore or offshore drilling; production and well
maintenance; exploration engineering, data and technology; energy transport; and
companies involved in equipment and plant design or construction. The Fund may
also invest in companies that provide products and services for these companies.
Energy service firms are affected by supply and demand both for their
specific product or service and for energy products in general. The price of oil
and gas,
7
<PAGE>
exploration and production spending, governmental regulation, world events and
economic conditions will likewise affect the performance of these companies.
Environmental Services
This sector consists of companies engaged in the research, development,
manufacture, or distribution of products, processes, or services related to
waste management or pollution control. Such products, processes or services may
include the transportation, treatment and disposal of both hazardous and solid
wastes, including waste-to-energy and recycling, remedial project efforts,
groundwater and storage tank decontamination, asbestos clean-up and emergency
cleanup response; and the detection, analysis, evaluation, and treatment of both
existing and potential environmental problems. The Fund may also invest in
companies that provide design, engineering, construction, and services to
companies engaged in waste management or pollution control.
Securities of companies in the environmental services field can be
impacted by legislation, government regulations, and enforcement policies. As
regulations are developed and enforced, companies may be required to alter or
cease production of a product or service. In addition, hazardous materials may
be involved, and companies can face significant liability risk.
Financial Services
These sectors consist of companies that provide financial services to
consumers and industry. Examples of companies in the financial services sectors
include commercial banks, savings and loan associations, brokerage companies,
insurance companies, real estate and leasing companies. Under SEC regulations,
the Fund may not invest more than 5% of its total assets in the equity
securities of any company that derives more than 15% of its revenues from
brokerage or investment management activities.
Financial services companies are subject to extensive governmental
regulation which may limit both the amounts and types of loans and other
financial commitments they can make, and the interest rates and fees they can
charge. Profitability is largely dependent on the availability and cost of
capital funds, and can fluctuate significantly when interest rates change.
Credit losses resulting from financial difficulties of borrowers can negatively
impact the sectors. Insurance companies may be subject to severe price
competition. Legislation is currently being considered which would reduce the
separation between commercial and investment banking businesses. If enacted this
could significantly impact the sectors and the Fund.
Food and Agriculture
This sector consists of companies engaged in the manufacture, sale, or
distribution of food and beverage products, agricultural products, and products
related to the development of new food technologies. The Fund may invest in
companies that
8
<PAGE>
sell products and services such as meat and poultry processors, grocery stores,
and restaurants; companies that manufacture and distribute soft drinks, pet
foods, wood products, tobacco, and agricultural machinery; and companies engaged
in the development of new technologies such as improved hybrid seeds.
The food and agriculture field is impacted by supply and demand, which
may be affected by demographic and product trends, food fads, marketing
campaigns, and environmental factors. In the United States, the agricultural
products industry is subject to regulation by many government agencies.
Health Care
This sector consists of companies engaged in the design, manufacture,
or sale of products or services used for or in connection with health care or
medicine. Companies in the health care sector may include pharmaceutical
companies, companies involved in research and development, companies involved in
the operation of health care facilities, and other companies involved in the
design, manufacture, or sale of health care-related products or services.
Many of these companies are subject to government regulation and
approval of their products and services, which could have a significant effect
on their price and availability. Furthermore, the types of products or services
produced or provided by these companies may quickly become obsolete.
Health Care Services
This sector consists of companies engaged in the ownership or
management of hospitals, nursing homes, health maintenance organizations, and
other companies specializing in the delivery of health care services. The Fund
may invest in companies that operate acute care, psychiatric, teaching, or
specialized treatment hospitals, as well as home health care providers, medical
equipment suppliers, and companies that provide related services.
Federal and state governments provide a substantial percentage of
revenues to health care service providers by way of Medicare and Medicaid. These
sources are subject to extensive governmental regulation, and appropriations are
a continued source of debate. The administration is currently examining the
health care industry to determine whether government funds are spent
appropriately and to ensure that adequate health care is available to everyone.
The demand for health care services should increase as the population ages.
However, studies have shown the ability of health care providers to curtail
unnecessary hospital stays and reduce costs. These changes could alter the
health care industry, focusing it more on home care and placing less emphasis on
inpatient revenues as a source of profit.
Industrial Equipment
9
<PAGE>
This sector consists of companies engaged in the manufacture,
distribution, or service of products and equipment for the industrial sector,
including integrated producers of capital equipment (such as general industrial
machinery, farm equipment, and computers), parts suppliers, and subcontractors.
The Fund may invest in companies that provide service establishment, railroad,
textile, farming, mining, oil field, semiconductor, and telecommunications
equipment; companies that manufacture products or service equipment for trucks,
construction, transportation, or machine tools; cable equipment; and office
automation companies.
The success of equipment manufacturing and distribution companies is
closely tied to overall capital spending levels, which are influenced by an
individual company's profitability and broader factors such as interest rates
and foreign competition. The industrial sector may also be affected by economic
cycles, technical progress, labor relations, and government regulations.
Leisure
This sector consists of companies engaged in design, production, or
distribution of goods or services in leisure industries. The Fund may invest in
companies that provide goods or services such as television and radio broadcast
manufacture (including cable television); motion pictures and photography;
recordings and musical instruments; publishing, including newspapers and
magazines; sporting goods and camping and recreational equipment; and sports
arenas. Other goods and services may include toys and games (including video and
other electronic games), amusement and theme parks, travel and travel-related
services, advertising, hotels and motels, leisure apparel or footwear, fast
food, beverages, restaurants, alcohol, tobacco products and gaming casinos.
Companies in the leisure industries may be considered speculative and
generally exhibit greater volatility than the overall market. Many companies
have unpredictable earnings, in part due to changing consumer tastes and intense
competition. The industries have reacted strongly to technological developments
and to the threat of government regulation.
Medical Equipment
These sectors consist of companies engaged in research, development,
manufacture, distribution, supply or sale of medical equipment and devices and
related technologies. This sector also includes companies involved in the design
and manufacture of medical equipment and devices, drug delivery technologies,
hospital equipment and supplies, medical instrumentation and medical
diagnostics. Companies in this industry may be affected by patient
considerations, rapid technological change and obsolescence, government
regulation, and government reimbursement for medical expenses.
Multimedia
10
<PAGE>
These sectors encompass companies engaged in the development,
production, sale, and distribution of goods or services used in the broadcast
and media industries. The Fund may invest in advertising companies; broadcasting
companies; theaters, film studios; publishing, printing, cable television and
video companies and equipment providers; companies involved in emerging
technologies such as cellular communications; and other companies involved in
the ownership, operation, or development of media products or services.
Some of the companies in the broadcast and media industries are
undergoing significant change because of federal deregulation of cable and
broadcasting. As a result, competitive pressures are intense and the securities
of these companies are subject to increased price volatility. Federal
Communications Commission rules govern the concentration of investment in AM,
FM, or TV stations, limiting investment alternatives.
Natural Resources
These sectors consist of companies that own or develop natural
resources, or supply goods and services to such companies. These may include
companies involved either directly or through subsidiaries in exploring, mining,
refining, processing, transporting, fabricating, dealing in, or owning natural
resources. Natural resources include precious metals ferrous and nonferrous
metals, strategic metals, hydrocarbons chemicals, forest products, real estate,
food, textile and tobacco products, and other basic commodities. The Fund may
also invest in precious metals and instruments whose value is linked to the
price of precious metals.
Securities of companies in the natural resources sector are subject to
swift price and supply fluctuations that may be caused by events relating to
international political and economic developments, energy conservation, the
success of exploration projects, and tax and other governmental regulatory
policies. Investment in precious metals can present concerns such as delivery,
storage and maintenance, possible illiquidity and the unavailability of accurate
market valuations.
Precious Metals and Minerals
These sectors include companies engaged in exploration, mining,
processing, or dealing in gold, silver, platinum, diamonds, or other precious
metals and minerals. The Fund may, but does not currently intend to, invest in
precious metals such as gold, silver, and platinum, or securities indexed to the
price of gold or other precious metals. The Fund may invest in companies that
manufacture and distribute precious metals and minerals products and companies
that invest in other companies engaged in gold- related activities.
The price of precious metals is affected by broad economic and
political conditions, including inflation. For example, the price of gold and
other precious metal mining securities can face substantial short-term
volatility caused by international monetary and political developments such as
currency devaluations or revaluations,
11
<PAGE>
economic and social conditions within a country, or trade restrictions between
countries. Because much of the world's gold reserves are located in South Africa
and Russia, the social and economic conditions there can affect gold and
gold-related companies located elsewhere.
Retailing
This sector consists of companies engaged in merchandising finished
goods and services primarily to individual consumers. These companies may
include drug and department stores, suppliers of goods and services for homes,
home improvements and yards; food, clothing, jewelry, electronics and computer
retailers; motor vehicle and marine dealers, warehouse membership clubs, mail
order operations, and companies involved in alternative selling methods.
The success of retailing companies is closely tied to consumer
spending, which is affected by general economic conditions and consumer
confidence levels. The retailing industry is highly competitive, and a company's
success is often tied to its ability to anticipate changing consumer tastes.
Software and Computer Services
This sector consists of companies engaged in research, design,
production or distribution of products or processes that relate to software or
information-based services. These companies may include companies that design
products such as systems-level software to run the basic functions of a
computer; or applications software for one type of work; and consulting,
communications, and related services. Competitive pressures may have a
significant effect on the financial condition of companies in the software and
computer services industries. For example, an increasing number of companies and
new product offerings can lead to price cuts and slower selling cycles.
Technology
This sector consists of companies which the Adviser believes have, or
will develop, products, processes, or services that will provide or will benefit
significantly from technological advances and improvements. These companies may
include companies that develop, produce or distribute products or services in
the computer, semi-conductor, electronics, communications, health care, and
biotechnology sectors.
Competitive pressures may have a significant effect on the financial
condition of companies in the technology sector. If technology continues to
advance at an accelerated rate, and the number of companies and product
offerings continues to expand, these companies could become increasingly
sensitive to short product cycles and aggressive pricing.
Telecommunications
12
<PAGE>
These sectors include companies engaged in the development,
manufacture, or sale of communications services or communications equipment.
Companies in the telecommunications field may range from traditional local and
long-distance telephone service or equipment providers to companies involved in
new technologies such as cellular telephone or paging services, fiber-optics,
and semiconductors.
Telephone operating companies are subject to both federal and state
regulations governing rates of return and services that may be offered. Many
companies in the industry fiercely compete for market share. Although telephone
companies usually pay an above-average dividend, the Fund's investment decisions
in these sectors are based primarily on growth potential and not on income.
Transportation
These sectors include companies engaged in providing transportation
services or companies engaged in the design, manufacture, distribution, or sale
of transportation equipment. Transportation services may include companies
involved in the movement of freight or people such as airline, railroad, ship,
truck and bus companies; equipment manufacturers (including makers of trucks,
automobiles, planes, containers, railcars or other modes of transportation and
related products); parts suppliers; and companies involved in leasing,
maintenance, and transportation-related services.
Transportation stocks are cyclical and have occasional sharp price
movements which may result from changes in the economy, fuel prices, labor
agreements, and insurance costs. The United States has been deregulating these
industries, but it is uncertain whether this trend will continue and what its
effect will be.
Utilities
This sector consists of companies in the public utilities industry and
companies deriving a majority of their revenues from their public utility
operations. These companies may include those companies that manufacture,
produce, sell, or transmit gas or electric energy; water supply, waste disposal
and sewerage, and sanitary service companies; and companies involved in
telephone, satellite, and other communication fields.
Public utility stocks have traditionally produced above-average
dividend income, but the Fund's investments are based on growth potential. The
Fund may not own more than 5% of the outstanding voting securities of more than
one "public utility company" as such term is defined by the Public Utility
Holding Company Act of 1935. The public utilities industries may be subject to
broad risks resulting from government regulation, financing difficulties, supply
and demand of services or fuel, and special risks associated with natural
resource conservation.
IMPLEMENTATION OF POLICIES AND RISKS
Securities and Investment Practices
13
<PAGE>
The following discussion contains more detailed information about the
types of instruments in which the Fund may invest, strategies the Adviser may
use in pursuit of the Fund's investment objective, and a summary of related
risks. Any restrictions listed supplement those discussed above. A complete
listing of the Fund's limitations and more detailed information about the Fund's
investments are contained in the Fund's SAI. Policies and limitations are
considered at the time of purchase; the sale of instruments is not required in
the event of a subsequent change in circumstances.
The Adviser may not buy all of these instruments or use all of these
techniques unless it believes that they are consistent with the Fund's
investment objective and policies and that doing so will help the Fund achieve
its goal.
Equity Securities. These securities include common stocks, preferred
stocks, convertible securities, and warrants. Common stocks represent an equity
(ownership) interest in a corporation. Although equity securities have a history
of long-term growth in value, their prices fluctuate based on changes in a
company's financial condition and on overall market conditions. Smaller
companies tend to be more sensitive to these factors.
Money Market Securities. These are high-quality, short-term instruments
issued by the U.S. Government, corporations, financial institutions, and other
entities. These securities may carry fixed, variable, or floating interest
rates. Money Market Securities may include commercial paper, certificates of
deposit, banker's acceptances, and time deposits. Money market securities may be
structured or may employ a trust or similar structure so that they are eligible
investments for money market funds. If the structure does not perform as
intended, adverse tax or investment consequences may result. The Fund may also
invest in money market securities, in repurchase agreements, and in money market
mutual funds, whose goal is to seek a high level of current income while
maintaining a stable $1.00 share price. A major change in interest rates or a
default on a money market fund's investments could cause its share price to
change.
U.S. Government Money Market Securities. These are short-term debt
instruments issued or guaranteed by the U.S. Treasury or by an agency or
instrumentality of the U.S. Government. Not all U.S. Government securities are
backed by the full faith and credit of the United States. For example, U.S.
Government securities such as those issued by Fannie Mae are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. Other U.S. Government securities such as those issued by the
Federal Farm Credit Banks Funding corporation are supported only by the credit
of the entity that issued them.
Exposure to Foreign Markets. Foreign securities and foreign currencies,
and securities issued by U.S. entities with substantial foreign operations may
involve additional risks and considerations. These include risks relating to
political, economic, or regulatory conditions in foreign countries; fluctuations
in foreign currencies; withholding or other taxes; trading, settlement,
custodial, and other operational risks; and the potentially less stringent
investor protection and disclosure standards of foreign
14
<PAGE>
markets. Additionally, governmental issuers of foreign debt securities may be
unwilling to pay interest and repay principal when due and may require that the
conditions for payment be renegotiated. All of these factors can make foreign
investments, especially those in emerging markets, more volatile and potentially
less liquid than U.S.
investments.
Variable and Floating Rate Securities. These securities have interest
rates that are periodically adjusted either at specific intervals or whenever a
benchmark rate changes. These interest rate adjustments are designed to help
stabilize the security's price.
Repurchase Agreements. In a repurchase agreement, the Fund buys a
security at one price and simultaneously agrees to sell it back at a higher
price. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent.
Investment Companies. The Fund may invest in the securities of open-end
investment companies (i.e., mutual funds) and closed-end investment companies.
Diversification. Diversifying the Fund's investment portfolio can
reduce the risk of investing. This may include limiting the amount of money
invested in any one issuer or, on a broader scale, in any one sector. The Fund
is a diversified mutual fund. This means that with respect to 75% of its total
assets, the Fund may not purchase a security, if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of any one issuer.
This limitation does not apply to U.S. government securities or securities of
other registered investment companies.
Borrowing. The Fund may borrow from banks or through reverse repurchase
agreements. If the Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If the Fund makes additional
investments while borrowings are outstanding, this may be considered a form of
leverage. The Fund may borrow only for temporary or emergency purposes, but not
in an amount exceeding 33 1/3% of its total assets.
Lending securities. The Fund may lend securities to broker-dealers and
institutions as a means of earning income. This practice could result in a loss
or a delay in recovering the Fund's securities. Loans in the aggregate may not
exceed 33 1/3% of the Fund's total assets.
Temporary Strategies. Prior to investing the proceeds from sales of
Fund shares, to meet ordinary daily cash needs, and to retain the flexibility to
respond promptly to changes in market and economic conditions, the Adviser may
hold cash and/or invest all or a portion of the Fund's assets in money market
instruments, which are short-term fixed income securities issued by private and
governmental institutions.
Portfolio Turnover. A change in the investments held by the Fund is known
as "portfolio turnover." Portfolio turnover generally involves some expenses to
the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the
15
<PAGE>
sale of securities and reinvestment in other securities. Such sales may result
in the realization of taxable capital gains. Under normal market conditions, the
Fund expects to be invested in five or more sectors, with each sector
represented by investment in at least five stocks. The Fund expects to regularly
review the relative strengths or weaknesses of the sectors in which the Fund's
investments have been allocated and the company stocks within each sector and
the Fund expects to exit sectors that are underperforming the general stock
market and to purchase securities from issuers in higher ranked sectors. In
actively carrying out the investment policies of the Fund and determining when
to sell securities and to reinvest in other sectors and companies, the rate of
portfolio turnover will not be a limiting factor. The Fund does not seek as a
goal long-term capital gains and holds securities for an extended period only
when sector trends are believed by the Adviser to extend for the long-term. The
result is higher than average portfolio turnover. In addition to potentially
greater brokerage commissions or dealer mark-ups and other transaction costs
resulting from relatively high portfolio turnover, relatively high portfolio
turnover may also result in increased short-term capital gains which are taxed
at a higher federal income tax rate than long-term capital gains. Additional
information regarding portfolio turnover and the impact on the capital gain
holding period is set forth in the Fund's SAI.
FUND MANAGEMENT
Management
Under the laws of the Commonwealth of Massachusetts, the Board of
Trustees of the Trust is responsible for managing the business and affairs of
the Trust. The Trust, on behalf of the Fund, has entered into an Investment
Advisory Agreement with the Adviser under which the Adviser manages the Fund's
investments and business affairs, subject to the supervision of the Trust's
Board of Trustees.
Adviser
The Adviser, T.O. Richardson Company, Inc., Two Bridgewater Road,
Farmington, Connecticut 06032-2256, is a Connecticut corporation founded in
1967. The Adviser is controlled by several of its officers. Under the Investment
Advisory Agreement, the Trust on behalf of the Fund, compensates the Adviser for
its management services at the annual rate of 1.50% of the Fund's average daily
net assets. The advisory fee is accrued daily and paid monthly. The Adviser has
no prior experience advising mutual funds; however, the Adviser has significant
experience in advising pooled investment vehicles similar to mutual funds, such
as bank common trust funds. As of _____ __, 1998, the Adviser managed over $220
million in client assets.
Portfolio Manager. The person responsible for management of the Fund is L.
Austine Crowe, Executive Vice President of the Adviser. For the past five years,
Mr. Crowe has been Executive Vice President of the Adviser and has actively
managed private accounts for the Adviser's clients according to the Adviser's
sector rotation
16
<PAGE>
discipline since November 1994. Mr. Crowe is a member of the Adviser's
investment committee, which has responsibility for all of the Adviser's
investment advice.
Custodian, Transfer Agent and Dividend-Disbursing Agent
Firstar Trust Company ("Firstar"), Mutual Fund Services, Third Floor,
615 East Michigan Street, Milwaukee, Wisconsin 53202 acts as custodian of the
Fund's assets (the "Custodian") and as dividend-disbursing agent (the
"Dividend-Disbursing Agent") and transfer agent for the Fund (the "Transfer
Agent").
Administrator
Pursuant to a Fund Administration Servicing Agreement and an Accounting
Servicing Agreement, Firstar also performs accounting and certain compliance and
tax reporting functions for the Fund. For administration services, Firstar
receives from the Fund a fee, calculated daily and paid monthly. The fee is
0.06% of the Fund's first $200 million of average daily net assets, plus 0.05%
of the Fund's next $500 million of average daily net assets, plus 0.03% of the
Fund's $___ million of average daily net assets, plus __% of the Fund's average
daily net assets in excess of $700 million, subject to an annual minimum. For
fund accounting services, Firstar receives from the Fund a fee, calculated daily
and paid monthly. The fee is $22,000 for the Fund's first $40 million of average
daily net assets, plus 0.01% of the Fund's next $200 million of average daily
net assets, plus 0.005% of the Fund's average daily net assets in excess of $240
million.
Distributor
Pursuant to a Distribution Agreement, dated ___________ __, 1998,
between the Trust and T.O. Richardson Securities, Inc., (the "Distributor") Two
Bridgewater Road, Farmington, Connecticut 06032-2256, the Distributor acts as
distributor of the Fund's shares. For its services, the Distributor is paid an
annual fee of $15,000 or 0.02% of the Fund's average daily net assets, whichever
is greater.
Fund Expenses
The Fund is responsible for its own expenses, including: interest
charges; taxes; brokerage commissions; organizational expenses; expenses of
registering or qualifying shares for sale with the states and the SEC; expenses
of issue, sale, repurchase or redemption of shares; expenses of printing and
distributing prospectuses to existing shareholders; charges of custodians;
expenses for accounting, administrative, audit, and legal services; fees for
outside Trustees; expenses of fidelity bond coverage and other insurance;
expenses of indemnification; extraordinary expenses; and costs of shareholder
and Trustee meetings.
HOW TO PURCHASE SHARES
17
<PAGE>
T.O. Richardson Securities, Inc., Two Bridgewater Road, Farmington,
Connecticut 06032-2256, an affiliate of the Adviser, acts as distributor of Fund
shares (the "Distributor"). Shares of the Fund may be purchased at the Offering
Price (as defined below) through any dealer that has entered into a sales
agreement with the Distributor, in its capacity as principal underwriter of
shares of the Fund, or through the Distributor directly. Firstar, the Fund's
Transfer Agent, may also accept purchase applications.
Payment for Fund shares should be made by check or money order in U.S.
dollars drawn on a U.S. bank, savings and loan, or credit union. The minimum
initial investment in a Fund is $5,000 ($2,000 for IRAs). Subsequent investments
of at least $500 may be made by mail or by wire. For investors using the
Automatic Investment Plan, as described below, the minimum investment is $1,000
with a minimum monthly investment of $100. These minimums can be changed or
waived by the Fund at any time. Shareholders will be given at least 30 days'
notice of any increase in the minimum dollar amount of subsequent investments.
Offering Price
Shares of the Fund are sold on a continual basis at the next offering
price (the "Offering Price"), which is the net asset value per share next
computed following receipt of an order in proper form by a dealer, the
Distributor or the Transfer Agent, as the case may be. See "Determination of Net
Asset Value."
Initial Investment - Minimum $5,000; $2,000 for IRAs
You may purchase Fund shares by completing the shareholder application
and mailing it and a check or money order payable to "T.O. Richardson Sector
Rotation Fund" to your securities dealer or the Transfer Agent. Please send to
the following address: Firstar Trust Company, Mutual Fund Services, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. In addition, overnight mail should be sent
to the following address: T.O. Richardson Sector Rotation Fund, Firstar Trust
Company, Mutual Fund Services, Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202. The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Accordingly, deposit in the mail
or with such services, or receipt at the Transfer Agent's post office box, of
purchase applications does not constitute receipt by the Transfer Agent or the
Fund. Do not mail letters by overnight courier to the post office box.
If the securities dealer through which you have chosen to purchase Fund
shares has not entered into a sales agreement with the Distributor, such dealer
may, nevertheless, offer to place your order for the purchase of Fund shares.
Purchases made through such dealers will be effected at the Offering Price. Such
dealers may also charge a transaction fee, as determined by the dealer. That fee
may be avoided if shares are purchased through a dealer who has entered into a
sales agreement with the Distributor or through the Transfer Agent.
18
<PAGE>
If your check does not clear, you will be charged a $20 service fee.
You will also be responsible for any losses suffered by the Fund as a result.
Neither cash nor third-party checks will be accepted. All applications to
purchase Fund shares are subject to acceptance by the Fund and are not binding
until so accepted. The Fund reserves the right to decline or accept a purchase
order application in whole or in part.
Wire Purchases
You may also purchase Fund shares by wire. the following instructions
should be followed when wiring funds to the Transfer Agent for the purchase of
Fund shares:
Wire to: Firstar Bank
ABA Number 075000022
Credit: Firstar Trust Company
Account _____________
Further Credit: T.O. Richardson Sector Rotation Fund
(shareholder account number)
(shareholder name/account registration)
Please call 1-[ ] prior to wiring any funds to notify the Transfer
Agent that the wire is coming and to verify the proper wire instructions so that
the wire is properly applied when received. The Fund is not responsible for the
consequences of delays resulting from the banking or Federal Reserve wire
system.
Telephone Purchases
The telephone purchase option allows investors to make subsequent
investments directly from a bank checking or savings account. To establish the
telephone purchase option on your account, complete the appropriate section in
the shareholder application. Only bank accounts held at domestic financial
institutions that are Automated Clearing House ("ACH") members may be used for
telephone transactions. This option will become effective approximately 15
business days after the application form is received by Firstar. Purchases must
be in amounts of $250 or more and may not be used for initial purchases of a
Fund's shares. To have Fund shares purchased at the offering price determined at
the close of regular trading on a given date, Firstar must receive both your
purchase order and payment by Electronic Funds Transfer through the ACH system
prior to the close of regular trading on such date. Most transfers are completed
within one business day. Subsequent investments may be made by calling [ ] .
Automatic Investment Plan - Minimum $1,000
The Automatic Investment Plan ("AIP") allows you to make regular,
systematic investments in the Fund from your bank checking or NOW account. The
minimum initial investment for investors using the AIP is $1,000. To establish
the AIP, complete the
19
<PAGE>
appropriate section in the shareholder application. Under certain circumstances
(such as discontinuation of the AIP before the Fund's minimum initial investment
is reached), the Fund reserves the right to close the investor's account. Prior
to closing any account for failure to reach the minimum initial investment, the
Fund will give the investor written notice and 60 days in which to reinstate the
AIP or otherwise reach the minimum initial investment. You should consider your
financial ability to continue in the AIP until the minimum initial investment
amount is met because the Fund has the right to close an investor's account for
failure to reach the minimum initial investment. Such closing may occur in
periods of declining share prices.
Under the AIP, you may choose to make monthly investments on the days
of your choosing (or the next business day thereafter) from your financial
institution in amounts of $100 or more. There is no service fee for
participating in the AIP. However, a service fee of $20 will be deducted from
the Fund account for any AIP purchase that does not clear due to insufficient
funds or, if prior to notifying the Fund in writing or by telephone of your
intention to terminate the plan, you close your bank account or in any manner
prevent withdrawal of funds from the designated checking or NOW account. You can
set up the AIP with any financial institution that is a member of ACH.
The AIP is a method of using dollar cost averaging which is an
investment strategy that involves investing a fixed amount of money at a regular
time interval. However, a program of regular investment cannot ensure a profit
or protect against a loss from declining markets. By always investing the same
amount, you will be purchasing more shares when the price is low and fewer
shares when the price is high. Since such a program involves continuous
investment regardless of fluctuating share values, you should consider your
financial ability to continue the program through periods of low share price
levels.
Subsequent Investments - Minimum $500
Additions to your account may be made by mail or by wire. Any
subsequent investment must be for at least $500. When making an additional
purchase by mail, enclose a check payable to "T.O. Richardson Sector Rotation
Fund" and the Additional Investment Form provided on the lower portion of your
account statement. To make an additional purchase by wire, please call [ ] for
complete wiring instructions.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is calculated once daily as
of the close of trading (generally 4:00 p.m. Eastern Time) on each day the NYSE
is open for business. Purchase orders received or shares tendered for redemption
on a day the NYSE is open for trading, prior to the close of trading on that
day, will be valued as of the close of trading on that day. Applications for
purchase of shares and requests for redemption of shares received after the
closing of trading on the NYSE will be valued as of the close of trading on the
next day the NYSE is open. The Fund's net asset value may not be calculated on
days during which the Fund receives no orders to purchase
20
<PAGE>
shares and no shares are tendered for redemption,. Net asset value is calculated
by taking the fair value of the Fund's total assets, including interest or
dividends accrued, but not yet collected, less all liabilities, and dividing by
the total number of shares outstanding. The result, rounded to the nearest cent,
is the net asset value per share.
In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are available are
valued at market value. Common stocks and other equity-type securities are
valued at the last sales price on the national securities exchange or NASDAQ on
which such securities are primarily traded; however, securities traded on a
national securities exchange or NASDAQ for which there were no transactions on a
given day, and securities not listed on a national securities exchange or
NASDAQ, are valued at the average of the most recent bid and asked prices. Fixed
income securities are valued by a pricing service that utilizes electronic data
processing techniques to determine values for normal institutional-sized trading
units of fixed income securities without regard to sale or bid prices when such
values are believed to more accurately reflect the fair market value of such
securities; otherwise, actual sale or bid prices are used. Any securities or
other assets for which market quotations are not readily available are valued at
fair value as determined in good faith by the Board of Trustees of the Trust.
The Board of Trustees may approve the use of pricing services to assist the Fund
in the determination of net asset value. Fixed income securities having
remaining maturities of 60 days or less when purchased are generally valued by
the amortized cost method. Under this method of valuation, a security is
initially valued at its acquisition cost and, thereafter, amortization of any
discount or premium is assumed each day, regardless of the impact of fluctuating
interest rates on the market value of the security.
HOW TO REDEEM SHARES
In General
Investors may request redemption of part or all of their Fund shares at
any time at the next determined net asset value. See "Determination of Net Asset
Value." No redemption request will become effective until all documents have
been received in proper form by Firstar. An investor should contact Firstar for
further information concerning documentation required for a redemption of Fund
shares. The Fund normally will mail your redemption proceeds the next business
day and, in any event, no later than seven business days after receipt of a
redemption request in good order. However, when a purchase has been made by
check, the Fund may hold payment on redemption proceeds until it is reasonably
satisfied that the check has cleared, which may take up to 12 days. The Fund
will pay in cash all redemptions during any 90 day period, in amounts up to the
lesser of $250,000 or 1% of the Fund's net assets at the beginning of the
period. Redemptions in excess of this limit may be paid, in whole or in part, in
securities or in cash, as the Trustees deem advisable.
Redemptions may also be made through brokers or dealers. Such
redemptions will be effected at the net asset value next determined after
receipt by the Fund of the
21
<PAGE>
broker or dealer's instruction to redeem shares. Some brokers or dealers may
charge a fee in connection with such redemptions.
Investors who have an IRA must indicate on their redemption requests
whether or not federal income tax should be withheld. Redemption requests
failing to make an election will be subject to withholding.
Written Redemption
For most redemption requests, an investor need only furnish a written,
unconditional request to redeem his or her shares at net asset value to the
Transfer Agent: Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. Overnight mail should be sent to Firstar Trust Company ("Firstar"),
Mutual Fund Services, Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202. Requests for redemption must (i) be signed exactly as the
shares are registered, including the signature of each owner, and (ii) specify
the number of shares or dollar amount to be redeemed. Redemption proceeds made
by written redemption request may also be wired to a commercial bank that you
have authorized on your account application. The Transfer Agent will charge a
$12 service fee for wire transactions. Additional documentation may be requested
from corporations, executors, administrators, trustees, guardians, agents or
attorneys-in-fact. The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Accordingly, deposit in the mail
or with such services, or receipt at the Transfer Agent's post office box of
redemption requests does not constitute receipt by the Transfer Agent or the
Fund. Do not mail letters by overnight courier to the post office box. Any
written redemption requests received within 15 days after an address change must
be accompanied by a signature guarantee.
Telephone Redemption
Shares of the Fund may also be redeemed by calling the Transfer Agent at [
]. Redemption requests by telephone are available for redemptions of $1,000 or
more. Redemption requests for less than $1,000 must be in writing. In order to
use this procedure, an investor must have previously elected this option in
writing, which election will be reflected in the records of the Transfer Agent,
and the redemption proceeds must be mailed directly to the investor or
transmitted to the investor's predesignated account by wire or ACH transfer.
Funds sent by ACH are automatically credited to your account within three
business days. There is currently no charge for this service. To change the
designated account, send a written request with signature(s) guaranteed to the
Transfer Agent. To change the address, call the Transfer Agent or send a written
request with signature(s) guaranteed to the Transfer Agent. Additional
documentation may be requested from corporations, executors, administrators,
trustees, guardians, agents or attorneys-in-fact. No telephone redemption
requests will be allowed within 15 days of such a change. The Fund reserves the
right to limit the number of telephone redemptions by an investor. Once made,
telephone redemptions may not be modified or canceled.
22
<PAGE>
The Transfer Agent will use reasonable procedures to ensure that
instructions received by telephone are genuine. These procedures may include
requiring some form of personal identification prior to acting upon telephone
instructions, recording telephonic transactions and/or sending written
confirmation of such transactions to investors. Assuming procedures such as the
above have been followed, neither the Fund nor the Transfer Agent will be liable
for any loss, cost, or expense for acting upon an investor's instructions or for
any unauthorized telephone redemption. The Fund reserves the right to refuse a
telephone redemption request if so advised.
Systematic Withdrawal Plan
You may set up automatic withdrawals from your account at regular
intervals. To begin receiving distributions, you must have an initial balance of
$10,000 in your account and withdraw at least $250 per payment. To establish the
systematic withdrawal plan ("SWP"), you must complete the appropriate section in
the shareholder application. Redemptions will take place on a monthly,
quarterly, semi-annual or annual basis (or the following business day) as
indicated in your shareholder application. You may vary the amount or frequency
of withdrawal payments or temporarily discontinue them by calling [ ]. Depending
upon the size of the account and the withdrawal request (and fluctuations in the
net asset value of the shares redeemed), redemptions for the purpose of
satisfying such withdrawals may reduce or even exhaust your account. If the
amount remaining in your account is not sufficient to meet a plan payment, the
remaining amount will be redeemed and the SWP will be terminated.
Signature Guarantees
Signature guarantees are required for: (i) redemption requests to be
mailed or wired to a person other than the registered owner(s) of the shares;
(ii) redemption requests to be mailed or wired to other than the address that
appears of record and (iii) any redemption request if a change of address has
been received by the Fund or Transfer Agent within the last 15 days. A signature
guarantee may be obtained from any eligible guarantor institution, as defined by
the SEC. These institutions include banks, savings associations, credit unions,
brokerage firms, and others. Please note that a notary public stamp or seal is
not acceptable.
Contingent Redemption Fee
The Fund is not designed for short-term traders, whose frequent
purchases, redemptions, and exchanges unnecessarily can disrupt the Fund's
investment program and drive up the Fund's transaction costs. For these reasons,
the Fund assesses a 1.25% fee on redemptions of Fund shares held for less than
one year. This contingent redemption fee is waived for shareholders of the Fund
who, immediately prior to their investment in the Fund, were previously private
clients of the Adviser.
Redemption fees will be paid to the Fund to help offset transaction
costs. The Fund will use the "first-in, first-out" (FIFO) method to determine
the one year holding period. Under this method, the date of the redemption will
be compared with the
23
<PAGE>
earliest purchase date of shares held in the account. If this holding period is
less than one year, the redemption fee will be assessed.
The fee does not apply to any shares purchased through reinvested
distributions (dividends and capital gains) or to shares held in retirement
plans such as 401(k), 403(b), 457, Keogh, profit sharing, SIMPLE IRA, SEP-IRA,
and money purchase pension accounts. These exceptions may not apply to shares
held in broker omnibus accounts. The fee does apply to shares held in IRA
accounts and to shares purchased through the Fund's automatic investment plan.
In determining the one year period, the Fund will use the anniversary
date of the transaction. Thus, shares purchased on September 1, 1998, for
example, will be subject to the fee if they are redeemed on or prior to August
31, 1999. If they are redeemed on or after September 1, 1999, they will not be
subject to the fee.
Your account may be terminated by the Fund on not less than 30 days' notice if,
at the time of any redemption of shares in your account, the value of the
remaining shares in the account falls below $250. Upon any such termination, a
check for the proceeds of redemption will be sent to you within seven days of
the redemption.
EXCHANGE PRIVILEGE
As a service to our shareholders, the Fund has established a program
whereby our shareholders can exchange shares of the Fund for shares of the
Firstar Money Market Funds (the "Firstar Funds"). Exchange requests are
available for exchanges of [$1,000] or more. The Firstar Funds are no-load money
market funds managed by an affiliate of Firstar. The Firstar Funds are unrelated
to the Fund. However, the Distributor may be compensated by the Firstar Funds
for servicing and related activities provided in connection with exchanges made
by shareholders of the Fund. This exchange privilege is a convenient way to buy
shares in money market funds in order to respond to changes in your goals or in
market conditions. Before exchanging into the Firstar Funds, please read the
applicable prospectus, which may be obtained by calling [ ]. As noted above,
there is no charge for written exchange requests. Firstar will, however, charge
a $5 fee for each exchange transaction that is executed by telephone.
An exchange from the Fund to the Firstar Funds, is treated the same way
as an ordinary sale and purchase for federal income tax purposes and you will
realize a capital gain or loss. An exchange is not a tax-free transaction.
INDIVIDUAL RETIREMENT ACCOUNTS
Individuals may establish their own tax-sheltered IRAs. The Fund offers
two types of IRAs that can be adopted by executing the appropriate Internal
Revenue Service ("IRS") Form. For more information on IRAs, please see the
separate IRA Disclosure Statement.
24
<PAGE>
Traditional IRA
In a Traditional IRA, amounts contributed to the IRA may be tax
deductible at the time of contribution depending on whether the investor is an
"active participant" in an employer-sponsored retirement plan and the investor's
income. Distributions from a Traditional IRA will be taxed at distribution
except to the extent that the distribution represents a return on the investor's
own contributions for which the investor did not claim (or was not eligible to
claim) a deduction. Distributions prior to age 59-1/2 may be subject to an
additional 10% tax applicable to certain premature distributions. Distributions
must commence by April 1 following the calendar year in which the investor
attains age 70-1/2. Failure to begin distributions by this date (or
distributions that do not equal certain minimum thresholds) may result in
adverse tax consequences.
Roth IRA
In a Roth IRA, amounts contributed to the IRA are taxed at the time of
contribution, but distributions from the IRA are not subject to tax if the
investor has held the IRA for certain minimum periods of time (generally, until
age 59-1/2). Investors whose income exceeds certain limits are ineligible to
contribute to a Roth IRA. Distributions that do not satisfy the requirements for
tax-free withdrawal are subject to income taxes (and possibly penalty taxes) to
the extent that the distribution exceeds the investor's contributions to the
IRA. The minimum distribution rules applicable to Traditional IRAs do not apply
during the lifetime of the investor. Following the death of the investor,
certain minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution
generally is equal to the lesser of $2,000 or 100% of the investor's
compensation (earned income). An individual may also contribute to a Traditional
IRA or Roth IRA on behalf of his or her spouse provided that the individual has
sufficient compensation (earned income). Contributions to a Traditional IRA
reduce the allowable contributions under a Roth IRA, and contributions to a Roth
IRA reduce the allowable contribution to a Traditional IRA.
Simplified Employee Pension Plan
A Traditional IRA may also be used in conjunction with a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is established by execution of Form
5305-SEP together with a Traditional IRA established for each eligible employee.
Generally, a SEP-IRA allows an employer (including a self-employed individual)
to purchase shares with tax deductible contributions not exceeding annually for
any one participant 15% of compensation (disregarding for this purpose
compensation in excess of $160,000 per year). The $160,000 compensation limit
applies for 1998 and is adjusted periodically for cost of living increases. A
number of special rules apply to SEP Plans, including a requirement that
contributions generally be made on behalf of all employees of the employer
(including for this purpose a sole proprietorship or partnership) who satisfy
certain minimum participation requirements.
Simple IRA
25
<PAGE>
An IRA may also be used in connection with a SIMPLE Plan established by
the investor's employer (or by a self-employed individual). When this is done,
the IRA is known as a SIMPLE IRA, although it is similar to a Traditional IRA
with the exceptions described below. Under a SIMPLE Plan, the investor may elect
to have his or her employer make salary reduction contributions of up to $6,000
per year to the SIMPLE IRA. The $6,000 limit is adjusted periodically for cost
of living increases. In addition, the employer will contribute certain amounts
to the investor's SIMPLE IRA, either as a matching contribution to those
participants who make salary reduction contributions or as a non-elective
contribution to all eligible participants whether or not making salary reduction
contributions. A number of special rules apply to SIMPLE Plans, including: (1) a
SIMPLE Plan generally is available only to employers with fewer than 100
employees; (2) contributions must be made on behalf of all employees of the
employer (other than bargaining unit employees) who satisfy certain minimum
participation requirements; (3) contributions are made to a SIMPLE IRA that is
separate and apart from the other IRAs of employees; (4) the distribution excise
tax (if otherwise applicable) is increased to 25% on withdrawals during the
first two years of participation in a SIMPLE IRA; and (5) amounts withdrawn
during the first two years of participation may be rolled over tax-free only
into another SIMPLE IRA (and not to a Traditional IRA or a Roth IRA). A SIMPLE
IRA is established by executing Form 5304-SIMPLE together with an IRA
established for each eligible employee.
Under current IRS regulations, all IRA applicants must be furnished a
disclosure statement containing information specified by the IRS. Applicants
generally have the right to revoke their account within seven days after
receiving the disclosure statement and obtain a full refund of their
contributions. The custodian may, in its discretion, hold the initial
contribution uninvested until the expiration of the seven-day revocation period.
The Custodian does not anticipate that it will exercise its discretion but
reserves the right to do so.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT
The Trust intends to qualify for treatment as a "Regulated Investment
Company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and, if so qualified, will not be liable for tax purposes. All
dividends paid by the Fund and distributions of net realized short-term capital
gains are taxable to you as ordinary income whether reinvested or received in
cash unless you are exempt from taxation or entitled to a tax deferral.
Distributions paid by the Fund from net realized long-term capital gains,
whether received in cash or reinvested in additional shares, are taxable as a
capital gain. The capital gain holding period is determined by the length of
time the Fund has held the securities and not the length of time you have held
shares in the Fund. Investors are informed annually as to the amount and nature
of all dividends and capital gains paid during the prior year. Such capital
gains and dividends may also be subject to state or local taxes.
The Fund intends to pay dividends annually and to distribute capital
gains, if any, at least annually. When a dividend or capital gain is
distributed, the Fund's net asset value decreases by the amount of the payment.
If you purchase shares shortly before a
26
<PAGE>
distribution, you will be subject to income taxes on the distribution, even
though the value of your investment (plus cash received, if any) remains the
same. All dividends and capital gains distributions will automatically be
reinvested in additional Fund shares at the then prevailing net asset value
unless an investor specifically requests that either dividends or capital gains
or both be paid in cash. An investor may change an election by telephone,
subject to certain limitations, by calling the Transfer Agent at [ ].
Investors requesting to have dividends and/or capital gains paid in
cash may choose to have such amounts mailed or sent via electronic funds
transfer ("EFT"). Transfers by EFT generally take up to three business days to
reach the investor's bank account.
If an investor elects to receive distributions and dividends by check
and the post office cannot deliver such check, or if such check remains uncashed
for six months, the Fund reserves the right to reinvest the distribution check
in the shareholder's account at the Fund's then current net asset value per
share and to reinvest all subsequent distributions in shares of the Fund.
If you do not furnish the Fund with your correct social security number
or taxpayer identification number, the Fund is required by federal law to
withhold federal income tax from your distributions and redemption proceeds at a
rate of 31%.
This section is not intended to be a full discussion of federal income
tax laws and the effect of such laws on your investment in the Fund. Additional
information regarding certain federal tax matters is set forth in the SAI. There
may be other federal, state, or local tax considerations applicable to a
particular investor. You are urged to consult your own tax adviser.
YEAR 2000 ISSUE
The Fund's operations depend on the seamless functioning of computer
systems in the financial service industry; including those of the Adviser and
Firstar. The Year 2000 issue arises due to computer programs using two digits
rather than four to define an applicable year. Computer programs may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in the processing of
date-related information. If the Fund, the Adviser, Firstar or their respective
computer services suppliers fail to adequately address the Year 2000 issue, such
a failure could adversely affect the handling of security trades, pricing and
account servicing for the Fund.
The Adviser has made compliance with the Year 2000 Issue a high
priority and is taking steps that it believes are reasonably designed to address
the Year 2000 Issue with respect to its computer systems. The Adviser has also
been informed that comparable steps are being taken by Firstar and the Fund's
other major service providers. The Adviser does not currently anticipate that
the Year 2000 Issue will have
27
<PAGE>
a material impact on its ability to continue to fulfill its duties as investment
adviser to the Fund.
FUND PERFORMANCE
The Fund may from time to time compare its respective investment
results to various passive indices or other mutual funds and cite such
comparisons in reports to shareholders, sales literature, and advertisements.
The results may be calculated on several bases, including yield, average annual
total return, total return, and cumulative total return.
Average annual total return and total return figures measure both the
net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in the
Fund over a specified period of time, assuming the reinvestment of all dividends
and distributions. Average annual total return figures are annualized and
therefore represent the average annual percentage change over the specified
period. Total return figures are not annualized and represent the aggregate
percentage or dollar value change over the period. Cumulative total return
simply reflects the Fund's performance over a stated period of time.
28
<PAGE>
FOR MORE INFORMATION
More information on the Fund is available free upon request, including
the following:
Annual/Semiannual Report
When available, these reports will describe the Fund's performance,
list portfolio holdings and contain a letter from the Fund's manager
discussing recent market conditions, economic trends and Fund
strategies.
Statement of Additional Information
The "SAI", dated _________ __, 1998 provides more detailed information
about the Fund and its policies. A current SAI is on file with the
Securities and Exchange Commission ("SEC") and is incorporated by
reference (i.e., is legally considered part of this Prospectus).
To Obtain Information:
Call: 1-800-[ ]
Write: T.O. Richardson Company, Inc.
E-Mail: [ ]
Internet: Text - only versions of Fund documents can be viewed online or
downloaded from SEC: http://www.sec.gov or
T.O. Richardson: [ ]
SEC: You may also obtain copies of documents by visiting the SEC's
Public Reference Room in Washington, D.C. (1-800-SEC-0330) or
by sending your request and a duplicating fee to the SEC's Public
Reference Section, Washington, D.C. 20549-6009.
TRUSTEES OFFICERS
Samuel Bailey, Jr. Samuel Bailey, Jr., President and Treasurer
Lloyd P. Griffiths, Executive Vice President
L. Austine Crowe, Executive Vice President
Kathleen M. Russo, Senior Vice President
and Secretary
INVESTMENT ADVISER CUSTODIAN, ADMINISTRATOR, TRANSFER
AGENT AND DIVIDEND-DISBURSING
T.O. Richardson Company, Inc. AGENT
Two Bridgewater Road
Farmington, Connecticut 06032-2256 Firstar Trust Company
Mutual Fund Services, Third Floor
615 East Michigan Street
Milwaukee, Wisconsin 53202
29
<PAGE>
DISTRIBUTOR
T.O. Richardson Securities, Inc.
Two Bridgewater Road
Farmington, Connecticut 06032-2256
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
[Address to be Supplied]
LEGAL COUNSEL
Sullivan & Worcester LLP 1025 Connecticut Avenue, N.W.
Washington, D.C. 20036 SEC File Number is 811-_______.
30
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
T.O. RICHARDSON TRUST
T.O. Richardson Sector Rotation Fund
Two Bridgewater Road
Farmington, Connecticut
06032-2256
1-[ ]
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the T.O. Richardson Trust (the
"Trust"), including the T.O. Richardson Sector Rotation Fund (the "Fund"), a
diversified series of the Trust, dated ____________ __, 1998. The Prospectus,
which may be revised from time to time, is available without charge upon request
to the above-noted address or telephone number.
This Statement of Additional Information is dated ____________ __, 1998
31
<PAGE>
TABLE OF CONTENTS
Page No.
THE FUND...............................................
INVESTMENT RESTRICTIONS................................
SECTOR DESCRIPTIONS....................................
INVESTMENT POLICIES AND TECHNIQUES.....................
TRUSTEES AND OFFICERS..................................
PRINCIPAL SHAREHOLDERS.................................
INVESTMENT ADVISER.....................................
FUND TRANSACTIONS AND BROKERAGE........................
FUND ADMINISTRATOR.....................................
CUSTODIAN..............................................
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT...........
DISTRIBUTOR............................................
TAXES..................................................
DETERMINATION OF NET ASSET VALUE.......................
SPECIAL REDEMPTIONS....................................
DESCRIPTION OF THE TRUST...............................
PERFORMANCE INFORMATION................................
INDEPENDENT ACCOUNTANTS................................
LEGAL COUNSEL..........................................
FINANCIAL STATEMENTS...................................
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information
32
<PAGE>
and the Prospectus dated ______ __, 1998, and if given or made, such information
or representations may not be relied upon as having been authorized by the Fund.
This Statement of Additional Information does not constitute an offer to sell
securities in any state or jurisdiction in which such offering may not lawfully
be made.
33
<PAGE>
THE FUND
The Trust was organized on June 2, 1998 as a voluntary business
association under the laws of the Commonwealth of Massachusetts. It is an
open-end diversified management investment company. The Fund is a series
portfolio of the Trust and is registered with the Securities and Exchange
Commission as an open-end, diversified management investment company.
INVESTMENT RESTRICTIONS
The investment objective of the Fund is to seek capital appreciation
while also providing some protection against downmarkets. In seeking to attain
its investment objective, the Fund invests mainly in equity securities of
companies within particular sectors or groups of sectors. The Adviser uses a
proprietary quantitative model to allocate assets among mainly equity securities
of companies within particular sectors or groups of sectors the Adviser
determines have the greatest potential for market appreciation. Assets are
allocated to the different sectors according to the Adviser's view of the
relative strengths or weaknesses of the sectors and the companies within those
sectors. The Fund's investment objective and policies are described in detail in
the Prospectus under the caption "Investment Objective and Policies." The
following are the Fund's fundamental investment restrictions. These restrictions
cannot be changed without shareholder approval.
The Fund:
1. May not, with respect to 75% of its total assets, purchase the
securities of any issuer (except securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities or securities
issued by other registered investment companies), if, as a result, (i)
more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (ii) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.
2. May (i) borrow money from banks for temporary or emergency purposes (but
not for leveraging or investment) and (ii) make other investments or engage
in other transactions permissible under the Investment Company Act of 1940,
as amended (the "1940 Act"), which may involve a borrowing, including
borrowing through reverse repurchase agreements, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the value of the
Fund's total assets (including the amount borrowed), less the Fund's
liabilities (other than borrowings). The Fund may also borrow money from
other persons to the extent permitted by applicable law.
3. May not issue senior securities, except as permitted under the 1940 Act.
4. May not act as an underwriter of another issuer's securities, except to
the extent that the Fund may be deemed to be an underwriter within the
meaning of the
34
<PAGE>
Securities Act of 1933, as amended (the "Securities Act"), in
connection with the purchase and sale of portfolio securities.
5. May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options, futures
contracts, or other derivative instruments, or from investing in
securities or other instruments backed by physical commodities).
6. May not make loans if, as a result, more than 33 1/3% of the Fund's
total assets would be loaned to other persons, except through (i)
purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.
7. May not purchase the securities of any issuer if, as a result, more
than 25% of the Fund's total assets would be invested in the securities
of issuers, the principal business activities of which are in the same
industry.
8. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prohibit the Fund from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged in real estate
activities).
In addition to the non-fundamental operating policies set forth in the
Prospectus, the following are the Fund's non-fundamental operating policies
which may be changed by the Board of Trustees without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short,
or unless it covers such short sale as required by the current rules
and positions of the Securities and Exchange Commission (the "SEC") or
its staff, and provided that transactions in options, futures
contracts, options on futures contracts, or other derivative
instruments are not deemed to constitute selling securities short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for clearance of transactions; and
provided that margin deposits in connection with futures contracts,
options on futures contracts, or other derivative instruments shall not
constitute purchasing securities on margin.
3. Purchase securities of other investment companies except in compliance
with the 1940 Act.
4. Engage in futures or options on futures transactions except in
accordance with the Commodity Exchange Act (the "CEA") and the rules
thereunder.
35
<PAGE>
5. Make any loans, except through (i) purchases of debt securities or
other debt instruments, or (ii) engaging in repurchase agreements.
6. Borrow money except from banks or through reverse repurchase agreements
or mortgage dollar rolls, and will not purchase securities when bank
borrowings exceed 5% of its assets.
7. Concentrate (i.e., invest more than 25% of) its assets in a particular
industry.
Except for the fundamental investment limitations listed above, the
other investment policies described in the Prospectus and this Statement of
Additional Information are not fundamental and may be changed with approval of
the Trust's Board of Trustees. Unless noted otherwise, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in percentage resulting from a change in the Fund's assets (i.e., due
to cash inflows or redemptions) or in market value of the investment or the
Fund's assets will not constitute a violation of that restriction.
SECTOR DESCRIPTIONS
Basic Materials: companies engaged in the manufacture, mining,
processing, or distribution of raw materials and intermediate goods used in
building and manufacturing. The products handled by the companies in which the
Fund may invest include chemicals, metals, concrete, timber, paper, copper, iron
ore, nickel, steel, aluminum, textiles, cement, and gypsum. The Fund may also
invest in the securities of mining, processing, transportation, and distribution
companies, including companies involved in equipment supplies and railroads.
Many companies in the industrial sectors are significantly affected by
the level and volatility of commodity prices, the exchange value of the dollar,
import, controls, and worldwide competition. At times, worldwide production of
these materials has exceeded demand as a result of over-building or economic
downturns. During these times, commodity price declines, and unit volume
reductions have led to poor investment returns and losses. Other risks may
include liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control.
Biotechnology: companies engaged in the research, development, and
manufacture of various biotechnological products, services, and processes. These
companies are often involved with new or experimental technologies such as
genetic engineering, hybridoma and recombinant DNA techniques and monoclonal
antibodies. The Fund may also invest in companies that manufacture and/or
distribute biotechnological and biomedical products, including devices and
instruments, and in companies that provide or benefit significantly from
scientific and technological advances in biotechnology. Some biotechnology
companies may provide processes or services instead of, or in addition to,
products.
36
<PAGE>
The description of the biotechnology sector will be interpreted broadly
by the Adviser, and may include applications and developments in such areas as
human health care (e.g., cancer, infectious disease, diagnostics and
therapeutics); pharmaceuticals (e.g., new drug development and production);
agricultural and veterinary applications (e.g., improved seed varieties, animal
growth hormones); chemicals (e.g., enzymes, toxic waste treatment);
medical/surgical (e.g., epidermal growth factor, in vivo imaging/therapeutics);
and industry (e.g., biochips, fermentation, enhanced mineral recovery).
Many of these companies may have losses and may not offer products for
some time. These companies may have persistent losses during a new product's
transition from development to production, and revenue patterns may be erratic.
In addition, biotechnology companies are affected by patent considerations,
intense competition, rapid technological change and obsolescence, and regulatory
requirements of the U.S. Food and Drug Administration, the Environmental
Protection Agency (EPA), state and local governments, and foreign regulatory
authorities. Many of these companies are relatively small and their stock is
thinly traded.
Business Services: companies that provide business-related services to
companies and other organizations. Business-related services may include for
example, data processing, consulting, outsourcing, temporary employment, market
research or data base services, printing, advertising, computer programming,
credit reporting, claims collection, mailing and photocopying. Typically, these
services are provided on a contract or fee basis. The success of companies that
provide business-related services is, in part, subject to continued demand for
such services as companies and other organizations seek alternative,
cost-effective means to meet their economic goals. Competitive pressures, such
as technological developments, fixed rate pricing, and the ability to attract
and retain skilled employees, also may have a significant impact on the
financial condition of companies in the business services industry.
Computers: companies engaged in the research, design, development,
manufacture, or distribution of products, processes, or services that relate to
currently available or experimental hardware technology within the computer
industry. The Fund may invest in companies that provide products or services:
mainframes, minicomputers, microcomputers, peripherals, data or information
processing, office or factory automation, robotics, artificial intelligence,
computer aided design, medical technology, engineering and manufacturing, data
communications and software.
Cyclical Industries: companies engaged in the research, development,
manufacture, distribution, supply, or sale of materials, equipment, products or
services related to cyclical industries. These may include the automotive,
chemical, construction and housing, defense and aerospace, environmental
services, industrial equipment and materials, paper and forest products, and
transportation industries.
Many companies in these industries are significantly affected by
general economic trends including employment, economic growth, and interest
rates. Other factors that may affect these industries are changes in consumer
sentiment and
37
<PAGE>
spending, commodity prices, legislation, government regulation and spending,
import controls, and worldwide competition. At times, worldwide production of
the materials used in cyclical industries has exceeded demand as a result of,
for example, over-building or economic downturns. During these times, commodity
price declines and unit volume reductions resulted in poor investment returns
and losses. Furthermore, a company in the cyclical industries may be subject to
liability for environmental damage, depletion of resources, and mandated
expenditures for safety and pollution control.
Electronics: companies engaged in the design, manufacture, or sale of
electronic components (semiconductors, connectors, printed circuit boards, and
other components); equipment vendors to electronic component manufacturers;
electronic component distributors; and electronic instruments and electronic
systems vendors. In addition, the fund may invest in companies in the fields of
defense electronics, medical electronics, consumer electronics, advanced
manufacturing technologies (computer-aided design and computer-aided
manufacturing [CAD/CAM], computer-aided engineering, and robotics), lasers and
electro-optics, and other new electronic technologies. Many of the products
offered by companies engaged in the design, production, or distribution of
electronic products are subject to risks of rapid obsolescence and intense
competition.
Energy: companies in the energy field, including the conventional areas
of oil, gas, electricity, and coal, and alternative sources of energy such as
nuclear, oil shale, and solar power. The business activities of companies in
which the Fund may invest include: production, generation, transmission,
refining, marketing, control, or distribution of energy or energy fuels such as
petrochemicals; providing component parts or services to companies engaged in
the above activities; energy research or experimentation; and environmental
activities related to the solution of energy problems, such as energy
conservation and pollution control. Companies participating in new activities
related to the solution of energy problems, such as energy conservation and
pollution control. Companies participating in new activities resulting from
technological advances or research discoveries in the energy field will also be
considered for this sector.
The securities of companies in the energy field are subject to changes
in value and dividend yield which depend, to a large extent, on the price and
supply of energy fuels. Swift price and supply fluctuations may be caused by
events relating to international politics, energy conservation, the success of
exploration projects, and tax and other regulatory policies of various
governments.
Energy Services: companies in the energy service field, including those
that provide services and equipment to the conventional areas of oil, gas,
electricity, and coal, and newer sources of energy such as nuclear, geothermal,
oil shale, and solar power. The Fund may invest in companies providing services
and equipment for drilling processes such as offshore and onshore drilling,
drill bits, drilling rig equipment, drilling string equipment, drilling fluids,
tool joints and wireline logging. Many energy service companies are engaged in
production and well maintenance, providing such products and services as
packers, perforating equipment, pressure pumping, downhole
38
<PAGE>
equipment, valves, pumps, compression equipment, and well completion equipment
and service. Certain companies supply energy providers with exploration
technology such as seismic data, geological and geophysical services, and
interpretation of this data. The Fund may also invest in companies with a
variety of products or services including pipeline construction, oil tool
rental, underwater well services, helicopter services, geothermal plant design
or construction, electric and nuclear plant design or construction,
energy-related capital equipment, mining related equipment, mining related
equipment or services, and high technology companies serving the above
industries. Energy service firms are affected by supply, demand and other normal
competitive factors for their specific products or services. They are also
affected by other unpredictable factors such as supply and demand for oil and
gas, prices of oil and gas, exploration and production spending, governmental
regulation, world events and economic conditions.
Environmental Services: companies engaged in the research, development,
manufacture, or distribution of products, processes, or services related to
waste management or pollution control. Such products, processes or services may
include the transportation, treatment and disposal of both hazardous and solid
wastes, including waste-to-energy and recycling; remedial project efforts,
including groundwater and storage tank decontamination, asbestos clean-up and
emergency cleanup response; and the detection, analysis, evaluation, and
treatment of both existing and potential environmental problems. The Fund may
also invest in companies that provide design, engineering, construction, and
consulting services to companies engaged in waste management or pollution
control.
The environmental services field has generally been positively
influenced by legislation resulting in stricter government regulations and
enforcement policies for both commercial and governmental generators of wast
materials, as well as specific expenditures designated for remedial cleanup
efforts. Companies in the environmental services field are also affected by
regulation by various federal and state authorities, including the federal EPA
and its state agency counterparts. As regulations are developed and enforced,
such companies may be required to alter or cease production of a product or
service or to agree to restrictions on their operations. In addition, since the
materials handled and processes involved include hazardous components, there is
significant liability risk. There are also risks of intense competition within
the environmental services field.
Financial Services: companies providing financial services to consumers
and industry. Companies in the financial services sectors include: commercial
banks, savings and loan associations, consumer and industrial finance companies,
securities brokerage companies, real estate-related companies, leasing
companies, and a variety of firms in all segments of the insurance industry such
as multi-line, property and casualty, and life insurance.
The financial services sectors are currently undergoing relatively
rapid change as existing distinctions between financial service segments become
less clear. For instance, recent business combinations have included insurance,
finance, and securities
39
<PAGE>
brokerage under single ownership. Some primarily retail corporations have
expanded into securities and insurance industries. Moreover, the federal laws
generally separating commercial and investment banking are currently being
studied by Congress.
Banks, savings and loan associations, and finance companies are subject
to extensive governmental regulation which may limit both the amounts and types
of loans and other financial commitments they can make and the interest rates
and fees they can charge. The profitability of these groups is largely dependent
on the availability and cost of capital funds, and can fluctuate significantly
when interest rates change. In addition, general economic conditions are
important to the operations of these concerns, with exposure to credit losses
resulting from possible financial difficulties of borrowers potentially having
an adverse effect. Insurance companies are likewise subject to substantial
governmental regulation, predominantly at the state level, and may be subject to
severe price competition.
Securities and Exchange Commission (SEC) regulations provide that the
Fund may not invest more than 5% of its total assets in the securities of any
company that derives more than 15% of its revenues from brokerage or investment
management activities. These companies as well as those deriving more than 15%
of profits from brokerage and investment management activities are considered to
be "principally engaged" in the business activities of the financial services
sector.
Food and Agriculture: companies engaged in the manufacture, sale, or
distribution of food and beverage products, agricultural products, and products
related to the development of new food technologies. The goods and services
provided or manufactured by companies in this sector include: packaged food
products such as cereals, pet foods and frozen foods; meat and poultry
processing; the production of hybrid seeds; the wholesale and retail
distribution and warehousing of food and food- related products, including
restaurants; and the manufacture and distribution of health food and dietary
products, fertilizer and agricultural machinery, wood products, tobacco and
tobacco leaf. In addition the Fund may invest in food technology companies
engaged in and pioneering the development of new technologies such as improved
hybrid seeds, new and safer food storage, and new enzyme technologies.
The success of food and food-related products is closely tied to supply
and demand, which may be affected by demographic and product trends, stimulated
by food fads, marketing campaigns, and environmental factors. In the United
States, the agricultural products industry is subject to regulation by numerous
federal and municipal government agencies.
Health Care: companies engaged in the design, manufacture, or sale of
products or services used for or in connection with health care or medicine.
Companies in the health care sector include pharmaceutical companies; firms that
design, manufacture, sell or supply medical, dental, and optical products,
hardware or services; companies involved in biotechnology, medical diagnostic,
and biochemical research and development, as well as companies involved in the
operation of health care facilities.
40
<PAGE>
Many of these companies are subject to government regulation of their products
and services, a factor which could have a significant and possibly unfavorable
effect on the price and availability of such products or services. Furthermore,
the types of products or services produced or provided by these companies may
become obsolete quickly.
Health Care Services: companies engaged in the ownership or management
of hospitals, nursing homes, health maintenance organizations, and other
companies specializing in the delivery of health care services. The Fund may
invest in companies that operate acute care, psychiatric, teaching, or
specialized care, home health care, drug and alcohol abuse treatment, and dental
care; firms operating comprehensive health maintenance organizations and nursing
homes for the elderly and disabled; and firms that provide related laboratory
services.
Federal and state governments provide a substantial percentage of
revenues to health care service providers by way of Medicare and Medicaid. The
future growth of this source of funds is subject to great uncertainty.
Additionally, the complexion of the private payment system is changing. For
example, insurance companies are beginning to offer long-term health care
insurance for nursing home patients to supplement or replace government
benefits. Also, membership in health maintenance organizations or prepaid health
plans is displacing individual payments for each service rendered by a hospital
or physician.
The demand for health care services will tend to increase as the
population ages. However, review of patients' need for hospitalization by
Medicare and health maintenance organizations has demonstrated the ability of
health care providers to curtail unnecessary hospital stays and reduce costs.
Industrial Equipment: companies engaged in the manufacture,
distribution, or service of products and equipment for the industrial sector,
including integrated producers of capital equipment (such as general industrial
machinery, farm equipment, and computers), parts suppliers, and subcontractors.
The Fund may invest in companies that manufacture products or service equipment
for the food, clothing or sporting goods industries; companies that provide
service establishment, railroad, textile, farming, mining, oil field,
semiconductor, and telecommunications equipment; companies that manufacture
products or service equipment for trucks, construction, transportation, machine
tools; cable equipment; and office automation companies.
The success of equipment manufacturing and distribution companies is
closely tied to overall capital spending levels. Capital spending is influenced
by an individual company's profitability and broader factors such as interest
rates and foreign competition, which are partly determined by currency exchange
rates. Equipment manufacturing concerns may also be affected by economic cycles,
technical obsolescence, labor relations difficulties and government regulations
pertaining to products, production facilities, or productions processes.
Leisure: companies engaged in design, production, or distribution of goods
or services in leisure industries. The goods or services provided by companies
in which
41
<PAGE>
the Fund may invest include: television and radio broadcast manufacture
(including cable television); motion pictures and photography; recordings and
musical instruments; publishing, including newspapers and magazines; sporting
goods and camping and recreational equipment; and sports arenas. Other goods and
services may include toys and games (including video and other electronic
games), amusement and theme parks, travel and travel-related services,
advertising, hotels and motels, leisure apparel or footwear, fast food,
beverages, restaurants, alcohol, tobacco products and gaming casinos.
Securities of companies in the leisure industries may be considered
speculative. Companies engaged in entertainment, gaming, broadcasting, cable
television and cellular communications, for example, have unpredictable
earnings, due in part to changing consumer tastes and intense competition.
Securities of companies in the leisure industries generally exhibit greater
volatility than the overall market. The market has been known to react strongly
to technological developments and to the specter of government regulation in the
leisure industries.
Medical Equipment: companies engaged in research, development,
manufacture, distribution, supply or sale of medical equipment and devices and
related technologies. The Fund may invest in companies involved in the design
and manufacture of medical equipment and devices, drug delivery technologies,
hospital equipment and supplies, medical instrumentation and medical
diagnostics. Companies in this industry may be affected by patient
considerations, rapid technological change and obsolescence, government
regulation, and government reimbursement for medical expenses.
Multimedia: companies engaged in the development, production, sale, and
distribution of goods or services used in the broadcast and media industries.
Business activities of companies in which the Fund may invest include:
ownership, operation, or broadcast of free or pay television, radio or cable
stations; publication and sale of newspapers, magazines, books or video
products; and distribution of data-based information. The Fund may also invest
in companies involved in the development, syndication and transmission of the
following products: television and movie programming, pay-per-view television,
advertising, cellular communications, and emerging technology for the broadcast
and media industries.
Some of the companies in the broadcast and media industries are
undergoing significant change because of federal deregulation of cable and
broadcasting. As a result, competitive pressures are intense and the stocks are
subject to increased price volatility. FCC rules govern the concentration of
investment in AM, FM, or TV stations, limiting investment alternatives.
Natural Resources: companies that own or develop natural resources, or
supply goods and services to such companies. Natural resources include precious
metals (e.g., gold, platinum and silver), ferrous and nonferrous metals (e.g.,
iron, aluminum, and copper), strategic metals (e.g., uranium and titanium),
hydrocarbons
42
<PAGE>
(e.g., coal, oil, and natural gases), chemicals, forest products, real estate,
food, textile and tobacco products, and other basic commodities. Exploring,
mining, refining, processing, transporting, and fabricating are examples of
activities of companies in the natural resources sector.
Precious metals, at times, have been subject to substantial price
fluctuations over short periods of time and may be affected by unpredictable
international monetary and political policies such as currency devaluations or
revaluations, economic and social conditions within a country, trade imbalances,
or trade or currency restrictions between countries. The Fund may also consider
instruments and securities indexed to the price of gold or other precious metals
as an alternative to direct investment in precious metals.
As a practical matter, investments in physical commodities can present
concerns such as delivery, storage and maintenance, possible illiquidity and the
unavailability of accurate market valuations. The Adviser, in addressing these
concerns, currently intends to purchase only readily marketable precious metals
and to deliver and store them with a qualified U.S. bank. Investment in bullion
earns no investment income and may involve higher custody and transaction costs
than investments in securities.
For the Fund to qualify as a regulated investment company under current
federal tax law, gains from selling precious metals may not exceed 10% of the
Fund's gross income for its taxable year. This tax requirement could cause the
Fund to hold or sell precious metals or securities when it would not otherwise
do so.
Precious Metals and Minerals: companies engaged in exploration, mining,
processing, or dealing in gold, silver, platinum, diamonds, or other precious
metals and minerals. The Fund may invest in companies that manufacture and
distribute precious metals and minerals products and companies that invest in
other companies engaged in gold and other precious metal and mineral-related
activities.
The value of the Fund's investments may be affected by changes in the
price of gold and other precious metals. Gold has been subject to substantial
price fluctuations over short periods of time and may be affected by
unpredictable international monetary and political developments such as currency
devaluations or revaluations; economic and social conditions within a country;
trade imbalances; or trade or currency restrictions between countries. Because
much of the world's known gold reserves are located in South Africa and Russia,
the social upheaval and related economic difficulties there may, from time to
time, influence the price of gold and the share values of precious metals mining
companies located elsewhere. Because companies involved in exploring, mining,
processing, or dealing in precious metals or minerals are frequently located
outside of the United States, all or a significant portion of the Fund's
investments in this sector may be invested in securities of foreign issuers.
Investors should understand the special considerations and risks related to
investment in this sector, and accordingly, the potential effect on the Fund's
value when investing in this sector.
43
<PAGE>
In addition to its investments in securities, the Fund may , but does
not currently intend to invest a portion of its assets in precious metals, such
as gold, silver, platinum, and palladium. The prices of precious metals are
affected by broad economic and political conditions, including inflation, but
are less subject to local and company-specific factors than securities of
individual companies. As a result, precious metals may be more or less volatile
in price than securities of companies engaged in precious metals- related
business.
For the Fund to qualify as a regulated investment company under current
federal tax law, gains from selling precious metals may not exceed 10% of the
Fund's gross income for its taxable year. This tax requirement could cause the
Fund to hold or sell precious metals or securities when it would not otherwise
do so.
Retailing: companies engaged in merchandising finished goods and
services primarily to individual consumers. Companies in which the Fund may
invest may include: general merchandise retailers, department stores, food
retailers, drug stores and any specialty retailers selling a single category of
merchandise such as apparel, toys, consumer electronics, or home improvement
products. The Fund may also invest in companies engaged in selling goods and
services through alternative means such as direct telephone marketing, mail
order, membership warehouse clubs, computer, or video based electronic systems.
The success of retailing companies is closely tied to consumer
spending, which in turn, is affected by general economic conditions and consumer
confidence levels. The retailing industry is highly competitive, and a company's
success is often tied to its ability to anticipate changing consumer tastes.
Software and Computer Services: companies engaged in research, design,
production or distribution of products or processes that relate to software or
information- based services. The Fund may invest in companies that provide
systems-level software (designed to run the basic functions of a computer) or
applications software (designed for one type of work) directed at either
horizontal (general use) or vertical (certain industries or groups) markets,
time-sharing services, information-based services, computer consulting,
communications software and data communications services.
Competitive pressures may have a significant effect on the financial
condition of companies in the software and computer services sector. For
example, if technology continues to advance at an accelerated rate, and the
number of companies and product offerings continue to expand, these companies
could become increasingly sensitive to short product cycles and aggressive
pricing.
Technology: companies which the Adviser believes have, or will develop,
products, processes, or services that will provide or will benefit significantly
from technological advances and improvements. These may include companies that
develop, produce or distribute products or services in the computer,
semi-conductor, electronics, communications, health care, and biotechnology
sectors.
44
<PAGE>
Competitive pressures may have a significant effect on the financial
condition of companies in the technology sector. If technology continues to
advance at an accelerated rate, and the number of companies and product
offerings continues to expand, these companies could become increasingly
sensitive to short product cycles and aggressive pricing.
Telecommunications: companies engaged in the development, manufacture,
or sale of communications services or communications equipment. Companies in the
telecommunications field offer a variety of services and products, including
local and long-distance telephone service; cellular, paging, local and wide area
product networks; satellite, microwave and cable television; and equipment used
to provide these products and services. Long-distance telephone companies may
also have interests in new technologies, such as fiber optics and data
transmission.
Telephone operating companies are subject to both federal and state
regulations governing rates of return and services that may be offered.
Telephone companies usually pay an above-average dividend. However, the Fund's
investment decisions are based primarily upon capital appreciation potential
rather than income considerations. Certain types of companies in which the Fund
may invest when investing in these sectors are engaged in fierce competition for
a share of the market for their products. In recent years, these companies have
been providing goods or services such as private and local area networks, or
engaged in the sale of telephone set equipment.
Transportation: companies engaged in providing transportation services
or companies engaged in the design, manufacture, distribution, or sale of
transportation equipment. Transportation services may include companies involved
in the movement of freight or people such as airline, railroad, ship, truck and
bus companies. Other service companies include those that provide automobile,
trucks, autos, planes, containers, rail cars, or any other mode of
transportation and their related products. In addition, the Fund may invest in
companies that sell fuel-saving devices to the transportation industries and
those that sell insurance and software developed primarily for transportation
companies.
Risk factors that affect transportation stocks include the state of the
economy, fuel prices, labor agreements, and insurance costs. Transportation
stocks are cyclical and have occasional sharp price movements which may result
from changes in the economy, fuel prices, labor agreements, and insurance costs.
The U.S. trend has been to deregulate these industries, which could have a
favorable long-term effect, but future government decisions may adversely affect
these companies.
Utilities: companies in the public utilities industry and companies
deriving a majority of their revenues from their public utility operations. The
Fund may invest in companies engaged in the manufacture, production, generation,
transmission and sale of gas and electric energy; water supply, waste disposal
and sewerage, and sanitary service companies; and companies involved in
telephone, satellite, and other communication fields including telephone,
telegraph, satellite, microwave and the provision of other communication
facilities for the public benefit (not including
45
<PAGE>
companies involved in public broadcasting). Public utility stocks have
traditionally produced above-average dividend income, but the Fund's investments
are made based on capital appreciation potential. The Fund may not own more than
5% of the outstanding voting securities of more than one public utility company
as defined by the Public Utility Holding Company Act of 1935. This policy is
non-fundamental and may be changed by the Board of Trustees.
INVESTMENT POLICIES AND TECHNIQUES
The discussion below contains more detailed information about the types
of investments the Fund may make, the strategies the Adviser may employ in
pursuit of the Fund's investment objective, and a summary of related risks. The
Adviser may not buy all of these instruments or use all of these techniques
unless it believes that doing so will help the Fund achieve a goal.
Closed-End Investment Companies. These are investment companies that
issue a fixed number of shares which trade on a stock exchange or
over-the-counter. Closed-end investment companies are professionally managed and
may invest in any type of security. Shares of closed-end investment companies
may trade at a premium or a discount to their net asset value. The Fund may
purchase shares of closed-end investment companies to facilitate investment in
certain foreign countries.
Convertible Securities. These are bonds, debentures, notes, preferred
stocks or other securities that may be converted or exchanged (by the holder or
by the issuer) into shares of the underlying common stock (or cash or securities
of equivalent value) at a stated exchange ratio. A convertible security may also
be called for redemption or conversion by the issuer after a particular date and
under certain circumstances (including a specified price) established upon
issue. If a convertible security held by the Fund is called for redemption or
conversion, the Fund could be required to tender it for redemption, convert it
into the underlying common stock, or sell it to a third party.
Convertible securities generally have less potential for gain or loss
than common stocks. Convertible securities generally provide yields higher than
the underlying stocks, but generally lower than comparable non-convertible
securities. Because of this higher yield, convertible securities generally sell
at prices above their "conversion value," which is the current market value of
the stock to be received upon conversion. The difference between this conversion
value and the price of convertible securities will vary over time depending on
changes in the value of the underlying common stocks and interest rates. When
the underlying common stocks decline in value, convertible securities will tend
not to decline to the same extent because of the interest or dividend payments
and the repayment of principal at maturity for certain types of convertible
securities. However, securities that are convertible other than at the option of
the holder generally do not limit the potential for loss to the same extent as
securities convertible at the option of the holder. When the underlying common
stocks rise in value, the value of convertible securities may also be expected
to increase. At the same time, however, the difference between the market value
of convertible securities and their conversion value will narrow. This means
that the value of convertible securities will generally not
46
<PAGE>
increase to the same extent as the value of the underlying common stocks.
Because convertible securities may also be interest-rate sensitive, their value
may increase as interest rates fall and decrease as interest rates rise.
Convertible securities are also subject to credit risk, and are often
lower-quality securities.
Delayed-Delivery Transactions. Securities may be bought and sold on a
delayed-delivery or when-issued basis. These transactions involve a commitment
to purchase or sell specific securities at a predetermined price or yield, with
payment and delivery taking place after the customary settlement period for that
type of security. Typically, no interest accrues to the purchaser until the
security is delivered.
When purchasing securities on a delayed-delivery basis, the purchaser
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations and the risk that the security will not be issued as
anticipated. Because payment for the securities is not required until the
delivery date, these risks are in addition to the risks associated with the
Fund's other investments. If the Fund remains substantially fully invested at a
time when delayed-delivery purchases are outstanding, the delayed- delivery
purchases may result in a form of leverage. When delayed-delivery purchases are
outstanding, the Fund will set aside appropriate liquid assets in a segregated
custodial account to cover the purchase obligations. When the Fund sells a
security on a delayed-delivery basis, the Fund does not participate in further
gains or losses with respect to the security. If the other party to a
delayed-delivery transaction fails to deliver or pay for the securities, the
Fund could miss a favorable price or yield opportunity or suffer a loss. The
Fund may renegotiate a delayed delivery transaction and may sell the underlying
securities before delivery, which may result in capital gains or losses for the
Fund.
Domestic and Foreign Investments include U.S. dollar-denominated time
deposits, certificates of deposit, and bankers' acceptances of U.S. banks and
their branches located outside of the United States, U.S. branches and agencies
of foreign banks, and foreign branches of foreign banks. Domestic and foreign
investments may include U.S. dollar-denominated securities issued or guaranteed
by other U.S. or foreign issuers, including U.S. and foreign corporations or
other business organizations, foreign governments, foreign government agencies
or instrumentalities, and U.S. and foreign financial institutions, including
savings and loan institutions, insurance companies, mortgage bankers, and real
estate investment trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation.
Payment of interest and repayment of principal on these obligations may also be
affected by governmental action in the country of domicile of the branch
(generally referred to as sovereign risk). In addition, evidence of ownership of
portfolio securities may be held outside of the United States and a fund may be
subject to the risks associated with the holding of such property overseas.
Various provisions of federal law governing the establishment and operation of
U.S. branches do not apply to foreign branches of U.S. banks.
47
<PAGE>
Obligations of U.S. branches and agencies of foreign banks may be
general obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
Obligations of foreign issuers involve certain additional risks. These
risks may include future unfavorable political and economic developments,
withholding taxes, seizures of foreign deposits, currency controls, interest
limitations, or other governmental restrictions that might affect repayment of
principal or payment of interest, or the ability to honor a credit commitment.
Additionally, there may be less public information available about foreign
entities. Foreign issuers may be subject to less governmental regulation and
supervision than U.S. issuers. Foreign issuers also generally are not bound by
uniform accounting, auditing, and financial reporting requirements comparable to
those applicable to U.S. issuers.
Exposure to Foreign Markets. Foreign securities, foreign currencies, and
securities issued by U.S. entities with substantial foreign operations may
involve significant risks in addition to the risks inherent in U.S. investments.
Foreign investment involves risks relating to local political,
economic, regulatory, or social instability, military action or unrest, or
adverse diplomatic developments, and may be affected by actions of foreign
governments adverse to the interests of U.S. investors. Such actions may include
expropriation or nationalization of assets, confiscatory taxation, restrictions
on U.S. investment or on the ability to repatriate assets or convert currency
into U.S. dollars, or other government intervention. There is no assurance that
the Adviser will be able to anticipate these potential events or counter their
effects. In addition, the value of securities denominated in foreign currencies
and of dividends and interest paid with respect to such securities will
fluctuate based on the relative strength of the U.S. dollar.
It is anticipated that in most cases the best available market for
foreign securities will be on an exchange or in over-the-counter (OTC) markets
located outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the United
States, and securities of some foreign issuers may be less liquid and more
volatile than securities of comparable U.S. issuers. Foreign security trading,
settlement and custodial practices (including those involving securities
settlement where Fund assets may be released prior to receipt of payment) are
often less developed than those in U.S. markets, and may result in increased
risk or substantial delays in the event of a failed trade or the insolvency of,
or breach of duty by, a foreign broker-dealer, securities depository or foreign
sub custodian. In addition, the costs associated with foreign investments,
including withholding taxes, brokerage commissions and custodial costs, are
generally higher than with U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers are generally not bound by uniform accounting, auditing, and
financial reporting requirements and standards of practice comparable to those
applicable to U.S. issuers. Adequate public information on foreign issuers may
not be available, and
48
<PAGE>
it may be difficult to secure dividends and information regarding corporate
actions on a timely basis. In general, there is less overall government
supervision and regulation of securities exchanges, brokers, and listed
companies than in the United States. OTC markets tend to be less regulated than
stock exchange markets and, in certain countries, may be unregulated. Regulatory
enforcement may be influenced by economic or political concerns, and investors
may have difficulty enforcing their legal rights in foreign countries.
Some foreign securities impose restrictions on transfer within the
United States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
American Depositary Receipts (ADRs) as well other "hybrid" forms of
ADRs, including European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs), are certificates evidencing ownership of shares of a foreign
issuer. These certificates are issued by depository banks and generally trade on
an established market in the United States or elsewhere. The underlying shares
are held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest and corporate actions. ADRs are
alternatives to directly purchasing the underlying foreign securities in their
national markets and currencies. However, ADRs continue to be subject to many of
the risks associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks of the
underlying issuer's country.
The risks of foreign investing may be magnified for investment in
emerging markets. Security prices in emerging markets can be significantly more
volatile than those in more developed markets, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, may present the risks of nationalization of businesses,
restrictions on foreign ownership and prohibitions on the repatriation of
assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be based on only
a few industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may
be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of holdings difficult or impossible at times.
Indexed Securities are instruments whose prices are indexed to the
prices of other securities, securities indices, currencies, precious metals or
other commodities, or other financial indicators. Indexed securities typically,
but not always, are debt securities or deposits whose value at maturity or
coupon rate is determined by reference to a specific instrument or statistic.
49
<PAGE>
Gold-indexed securities typically provide for a maturity value that
depends on the price of gold, resulting in a security whose price tends to rise
and fall together with gold prices. Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign- denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. Indexed securities may be more volatile than the underlying
instruments. Indexed securities are also subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. Government agencies.
The Fund may consider purchasing securities indexed to the price of
precious metals as an alternative to direct investment in precious metals. The
Fund will only buy precious metals-indexed securities when the Adviser is
satisfied with the creditworthiness of the issuers liable for payment. The
securities generally will earn a nominal rate of interest while held by the
Fund, and may have maturities of one year or more. In addition, the securities
may be subject to being put by the Fund to the issuer, with payment to be
received on no more than seven days' notice. The put feature would ensure the
liquidity of the notes in the absence of an active secondary market.
Money Market Securities. These are high-quality, short-term
obligations. Some money market securities employ a trust or other similar
structure to modify the maturity, price characteristics, or quality of financial
assets. For example, put features can be used to modify the maturity of a
security or interest rate adjustment features can be used to enhance price
stability. If the structure does not perform as intended, adverse tax or
investment consequences may result. Neither the Internal Revenue Service (IRS )
nor any other regulatory authority has ruled definitively on certain legal
issues presented by structured securities. Future tax or other regulatory
determinations could adversely affect the value, liquidity, or tax treatment of
the income received from these securities. Future tax or other regulatory
determinations could adversely affect the value, liquidity, or tax treatment of
the income received from these securities or the nature and timing of
distributions made by the Fund.
Real Estate Investment Trusts. Equity real estate investment trusts own
real estate properties. Mortgage real estate investment trusts make
construction, development and long-term mortgage loans. Their value may be
affected by changes in
50
<PAGE>
the value of the underlying property of the trusts, the creditworthiness of the
issuer, property taxes, interest rates, and tax and regulatory requirements,
such as those relating to the environment. Both types of trusts are dependent
upon management skill, are not diversified, and are subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to qualify for tax-free status of income under the Internal Revenue Code
and failing to maintain exemption from the 1940 Act.
Repurchase Agreements. In a repurchase agreement, the Fund purchases a
security and simultaneously commits to sell that security back to the original
seller at an agreed-upon price. The resale price reflects the purchase price
plus an agreed-upon incremental amount which is unrelated to the coupon rate or
maturity of the purchased security. As protection against the risk that the
original seller will not fulfill its obligation, the securities are held in a
separate account at a bank, marked-to market daily, and maintained at a value at
least equal to the sale price plus the accrued incremental amount. While it does
not presently appear possible to eliminate all risks from these transactions
(particularly the possibility that the value of the underlying security will be
less than the resale price, as well as delays and costs to the Fund in
connection with bankruptcy proceedings), the Fund will engage in repurchase
agreement transactions with parties whose creditworthiness has been reviewed and
found satisfactory by the Adviser.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the
Fund sells a security to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase that security at an agreed-upon price
and time. While a reverse repurchase agreement is outstanding, the Fund will
maintain appropriate liquid assets in a segregated custodial account to cover
its obligation under the agreements. The Fund will enter into reverse repurchase
agreements with parties whose creditworthiness has been reviewed and found
satisfactory by the Adviser. Such transactions may increase fluctuations in the
market value of Fund assets and may be viewed as a form of leverage.
Securities Lending. The Fund may lend securities to parties such as
broker-dealers or institutional investors. Securities lending allows the Fund to
retain ownership of the securities loaned and, at the same time, to earn
additional income. Since there may be delays in the recovery of loaned
securities, or even a loss of rights in collateral supplied should the borrower
fail financially, loans will be made only to parties deemed by the Adviser to be
of good standing. Furthermore, they will only be made if, in the Adviser's
judgment, the consideration to be earned from such loans would justify the risk.
The Adviser understands that it is the current view of the SEC Staff
that the Fund may engage in loan transactions only under the following
conditions: (1) the Fund must receive 100% collateral in the form of cash or
cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral: (3) after giving notice, the Fund must be able to terminate the
51
<PAGE>
loan at any time; (4) the Fund must receive reasonable interest on the loan or a
flat fee from the borrower, as well as amounts equivalent to any dividends,
interest, or other distributions on the securities loaned and to any increase in
market value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) the Board of Trustees must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower.
Cash received through loan transactions may be invested in
other eligible securities. Investing this cash subjects that investment, as well
as the security loaned, to market forces (i.e., capital appreciation or
depreciation).
Short Sales "Against the Box." The Fund may sell securities short when
it owns or has the right to obtain securities equivalent in kind or amount to
the securities sold short. Such short sales are known as short sales "against
the box." If the Fund enters into a short sale against the box, it will be
required to set aside securities equivalent in kind and amount to the securities
sold short (or securities convertible or exchangeable into such securities) and
will be required to hold such securities while the short sale is outstanding.
Sources of Credit or Liquidity Support. The Adviser may rely on its
evaluation of the credit of a bank or other entity in determining whether to
purchase a security supported by a letter of credit guarantee, put or demand
feature, insurance or other source of credit or liquidity. In evaluating the
credit of a foreign bank or other foreign entities, the Adviser will consider
whether adequate public information about the entity is available and whether
the entity may be subject to unfavorable political or economic developments,
currency controls, or other government restrictions that might affect its
ability to honor its commitment.
Temporary Strategies. Prior to investing the proceeds from sales of
Fund shares, to meet ordinary cash needs, and to retain the flexibility to
respond promptly to changes in market and economic conditions, the Adviser may
hold cash and/or invest all or a portion of the Fund's assets in money market
instruments, which are short-term fixed income securities issued by private and
governmental institutions.
Variable and Floating Rate Securities. These provide for periodic
adjustments in the interest rate paid on the security. Variable rate securities
provide for a specified periodic adjustment in the interest rate, while floating
rate securities have interest rates that change whenever there is a change in a
designated benchmark rate. Some variable or floating rate securities are
structured with put features that permit holders to demand payment of the unpaid
principal balance plus accrued interest from the issuers or certain financial
intermediaries.
Warrants. Warrants are instruments which entitle the holder to buy an
equity security at a specific price for a specific period of time. Changes in
the value of a warrant do not necessarily correspond to changes in the value of
its underlying security. The price of a warrant may be more volatile than the
price of its underlying security, and a warrant may offer greater potential for
capital appreciation as well as capital loss.
52
<PAGE>
Warrants do not entitle a holder to dividends or voting rights with respect to
the underlying security and do not represent any rights in the assets of the
issuing company. A warrant ceases to have value if it is not exercised prior to
its expiration date. These factors can make warrants more speculative than other
types of investments.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, together with information as to
their principal business occupations during the last five years, and other
information, are shown below. Each Trustee who is deemed an "interested person,"
as such term is defined in the 1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
Name, Address (Age) Positions Held with Fund Principal Occupation(s)
<S> <C> <C>
During Past Five Years
*Samuel Bailey, Jr. ( ) Chairman of the Board, Chief Executive Officer and
President and Treasurer President of the Adviser
</TABLE>
[Information on other Trustees and Officers to be Supplied]
*Denotes an "interested person" of the Fund as such term is defined in the 1940
Act.
Compensation of Trustees
<TABLE>
<CAPTION>
Name Aggregate Pension or Total
Compensation Retirement Compensation
from Fund Benefits From Fund and
Fund Complex
<S> <C> <C> <C>
Samuel Bailey, Jr. $_______ None $_________
</TABLE>
[Other Trustees to be Supplied]
As of ____________, __, 1998, the officers and Trustees of the Trust
did not beneficially own any of the shares of beneficial interest of the Fund's
then outstanding shares. Trustees and officers of the Trust who are also
officers, directors, employees, or shareholders of the Adviser do not receive
any remuneration from the Fund for serving as Trustees or officers.
PRINCIPAL SHAREHOLDERS
53
<PAGE>
As of ____________, __, 1998, the following persons owned of record or
are known by the Trust to own of record or beneficially 5% or more of the
outstanding shares of the Fund:
Name and Address No. Shares Percentage
Based on the foregoing, as of _______________, __ , 1998, _____________
owned a controlling interest in the Trust. Shareholders with a controlling
interest could affect the outcome of proxy voting or the direction of management
of the Trust.
INVESTMENT ADVISER
T.O. Richardson Company, Inc. (the "Adviser") is the investment adviser to
the Fund. The Adviser is controlled by several of its officers. The Adviser's
address is Two Bridgewater Road, Farmington, Connecticut 06032-2256.
The investment advisory agreement between the Fund and the Adviser
dated as of _____________ __, 1998 (the "Advisory Agreement") has an initial
term of two years and thereafter is required to be approved annually by the
Board of Trustees of the Trust or by vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act.) Each annual renewal
must also be approved by the vote of a majority of the Trust's Trustees who are
not parties to the Advisory Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement was approved by the Board of Trustees, including a
majority of the disinterested Trustees on ___________ __, 1998 and by the
initial shareholder of the Fund on _____________ __, 1998. The Advisory
Agreement is terminable without penalty, on 60 days' written notice by the Board
of Trustees of the Trust, by vote of a majority of the Fund's outstanding voting
securities or by the Adviser, and will terminate automatically in the event of
its assignment.
Under the terms of the Advisory Agreement, the Adviser manages the
Fund's investments and business affairs, subject to the supervision of the
Trust's Board of Trustees. At its expense, the Adviser provides office and space
and all necessary office facilities, equipment and personnel for managing the
investments of the Fund. As compensation for its services, the Fund pays the
Adviser an annual management fee of 1.50% of its average daily net assets. The
advisory fee is accrued daily and paid monthly.
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser, in its capacity as portfolio
manager, is responsible for decisions to buy and sell securities for the Fund
and for the placement of the Fund's securities business, the negotiation of the
commissions to be paid on such transactions and the allocation of portfolio
brokerage business. The Adviser seeks to obtain the best execution at the best
security price available with respect to each
54
<PAGE>
transaction. The best price to the Fund means the best net price without regard
to the mix between the purchase or sale price and commission, if any. While the
Adviser seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest available commission. Brokerage may be allocated
based on the sale of a Fund's shares.
Section 28(e) of the Securities Exchange Act of 1934, as amended
("Section 28(e)") permits an investment adviser, such as the Adviser, under
certain circumstances, to cause an account to pay a broker or dealer who
supplies brokerage and research services a commission for effecting a
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting the transaction. Brokerage and research services
include: (a) furnishing advice as to the value of securities, the advisability
of investing in, purchasing or selling securities and the availability of
securities or purchasers or sellers of securities; (b) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; and (c) effecting securities
transactions and performing functions incidental thereto (such as clearance,
settlement, and custody).
In selecting brokers or dealers, the Adviser considers investment and
market information and other research, such as economic, securities and
performance measurement research provided by such brokers or dealers and the
quality and reliability of brokerage services, including execution capability,
performance and financial responsibility. Accordingly, the commission charged by
any such broker or dealer may be greater than the amount another firm might
charge if the Adviser determines in good faith that the amount of such
commissions is reasonable in relation to the value of the research information
and brokerage services provided by such broker or dealer to the Fund. The
Adviser believes that the research information received in this manner provides
the Fund with benefits by supplementing the research otherwise available to the
Fund. Such higher commissions will not be paid by the Fund unless (a) the
Adviser determines in good faith that the amount is reasonable in relation to
the services in terms of the particular transaction or in terms of the Adviser's
overall responsibilities with respect to the accounts, including the Fund, as to
which it exercises investment discretion; (b) such payment is made in compliance
with the provisions of Section 28(e) and other applicable state and federal
laws; and (c) in the opinion of the Adviser, the total commissions paid by the
Fund will be reasonable in relation to the benefits to the Fund over the long
term.
The Adviser places portfolio transactions for other advisory accounts
the Adviser manages. Research services furnished by firms through which the Fund
effects its securities transactions may be used by the Adviser in servicing all
of its accounts; not all of such services may be used by the Adviser in
connection with the Fund. The Adviser believes it is not possible to measure
separately the benefits from research services to each of the accounts the
Adviser manages (including the Fund). Because the volume and nature of the
trading activities of the accounts are not uniform, the amount of commissions in
excess of those charged by another broker paid by each account for brokerage and
research services will vary. However, the Adviser believes such costs to
55
<PAGE>
the Fund will not be disproportionate to the benefits received by the Fund on a
continuing basis. The Adviser seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by the
Fund and another advisory account. In some cases, this procedure could have an
adverse effect on the price or the amount of securities available to the Fund.
In making such allocations between a Fund and other advisory accounts, the main
factors considered by the Adviser are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment and the size of investment commitments
generally held.
Portfolio turnover generally involves some expenses to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestment in other securities.
Under normal market conditions, the Fund expects to be invested in five
or more sectors, with each sector represented by investment in at least five
stocks. The Fund expects to regularly review the relative strengths or
weaknesses of the sectors in which the Fund's investments have been allocated
and the company stocks within each sector and the Fund expects to exit sectors
that are underperforming the general stock market and to purchase securities
from issuers in higher ranked sectors. In actively carrying out the investment
policies of the Fund and determining when to sell securities and to reinvest in
other sectors and companies, the rate of portfolio turnover will not be a
limiting factor. As a result, under relatively volatile market conditions, the
Fund may have higher portfolio turnover than long-term growth mutual funds, for
example. In addition to potentially greater brokerage commissions or dealer
mark-ups and other transaction costs resulting from relatively high portfolio
turnover, relatively high portfolio turnover may also result in increased
short-term capital gains which are taxed at a higher federal income tax rate
than long-term capital gains.
FUND ADMINISTRATOR
The Board of Trustees of the Trust has approved a Fund Administration
Servicing Agreement between the Trust and Firstar Trust Company ("Firstar")
pursuant to which Firstar serves as administrator of the Fund. The
administrative services supplied by Firstar include general Fund management
(excluding investment advisory services), compliance with federal and state
laws, financial reporting and tax reporting. Firstar's address is Firstar,
Mutual Fund Services, Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202.
CUSTODIAN
Pursuant to a Custodian Agreement, the Board of Trustees of the Trust
has appointed Firstar as custodian of the Fund. As custodian, of the Fund's
assets, Firstar has custody of all securities and cash of the Fund, delivers and
receives payment for portfolio securities sold, receives and pays for portfolio
securities purchased, collects income from investments and performs other
duties, all as directed by the officers of the Trust.
56
<PAGE>
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Firstar also acts as transfer agent and dividend-disbursing agent for
the Fund. Firstar is compensated based on an annual fee per open account of
[$14] subject to a minimum annual fee of [$____] plus out-of-pocket expenses,
such as postage and printing expenses in connection with shareholder
communications. Firstar also receives an annual fee per closed account of [$14].
DISTRIBUTOR
Distributor
Under a distribution agreement dated ________ __, 1998 (the
"Distribution Agreement"), T.O. Richardson Securities, Inc. (the "Distributor")
acts as principal distributor of the Fund's shares. The Distributor, an
affiliate of the Adviser, is located at the same address as the Adviser. The
Distribution Agreement provides that the Distributor will use its best efforts
to distribute the Fund's shares, which shares are offered for sale by the Fund
continuously at net asset value per share without the imposition of a sales
charge.
TAXES
The Trust intends to qualify for treatment as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, and, if so
qualified, will not be liable for tax purposes. The Fund will be treated as a
separate entity for federal income tax purposes since the Tax Reform Act of 1986
requires that all portfolios of a series fund be treated as separate taxpayers.
As indicated under "Dividends, Capital Gains Distributions, and Tax Treatment"
in the Prospectus, the Fund intends to qualify annually as a "regulated
investment company" under the Code. This qualification does not involve
government supervision of the Fund's management practices or policies.
A dividend or capital gain distribution received shortly after the
purchase of shares reduces the net asset value of shares by the amount of the
dividend or distribution and, although in effect a return of capital, will be
subject to income taxes. Net gains on sales of securities when realized and
distributed are taxable as capital gains. If the net asset value of shares were
reduced below a shareholder's cost by distribution of gains realized on sales of
securities, such distribution would be a return of investment although taxable
as indicated above.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the same caption, the net asset
value of the Fund will be determined as of the close of trading on each day the
New York Stock Exchange (the "NYSE") is open for trading. The Fund does not
determine net asset value on days the NYSE is closed and at other times
described in the Prospectus. The NYSE is closed on New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas
57
<PAGE>
Day. Additionally, if any of the aforementioned holidays falls on a Saturday,
the NYSE will not be open for trading on the preceding Friday and when such
holiday falls on a Sunday, the NYSE will not be open for trading on the
succeeding Monday, unless unusual business conditions exist, such as the ending
of a monthly or the yearly accounting period.
SPECIAL REDEMPTIONS
If the Board of Trustees of the Fund determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the portfolio of
the Fun, instead of in cash, in conformity with applicable rules of the SEC. The
Fund will, however, redeem shares solely in cash up to the lesser of $250,000 or
1% of its net assets during any 90-day period for any one shareholder. The
proceeds of redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for Federal income tax
purposes.
DESCRIPTION OF THE TRUST
The Trust is an open-end diversified series management investment
company established as an unincorporated business trust under the laws of The
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated June 2,
1998.
The Trustees of the Trust have authority to issue an unlimited number
of shares of beneficial interest in an unlimited number of series (each, a
"Series") each share without par value. Currently, the Trust consists of one
Series -- the Fund. Each share in a particular Series represents an equal
proportionate interest in that Series with each other share of that Series and
is entitled to such dividends and distributions as are declared by the Trustees
of the Trust. Upon any liquidation of a Series, shareholders of that Series are
entitled to share pro rata in the net assets of that Series available for
distribution. Shareholders in one of the Series have no interest in, or rights
upon liquidation of, any of the other Series.
The Trust will normally not hold annual meetings of shareholders to
elect Trustees. If less than a majority of the Trustees of the Trust holding
office have been elected by shareholders, a meeting of shareholders of the Trust
will be called to elect Trustees. Under the Declaration of Trust of the Trust
and the 1940 Act, the record holders of not less than two-thirds of the
outstanding shares of the Trust may remove a Trustee by votes cast in person or
by proxy at a meeting called for the purpose or by a written declaration filed
with the Trust's custodian bank. Except as described above, the Trustees will
continue to hold office and may appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust of the Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of this disclaimer
be given in each agreement, obligation or
58
<PAGE>
instrument entered into or executed by the Fund or the Trustees. The Declaration
of Trust of the Trust provides for indemnification out of the Trust's property
for all loss and expense of any shareholder held personally liable for
obligations of the Trust and its Fund. Accordingly, the risk of a shareholder of
the Trust incurring a financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations. The likelihood of such circumstances is remote.
PERFORMANCE INFORMATION
As described in the "Fund Performance" section of the Fund's
Prospectus, the Fund's historical performance or return may be shown in the form
of various performance figures. The Fund's performance figures are based upon
historical results and are not necessarily representative of future performance.
Factors affecting the Fund's performance include general market conditions,
operating expenses, and investment management.
Total Return
The average annual total return of the Fund is computed by finding the
average annual compounded rates of return over the periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n=ERV
<TABLE>
<CAPTION>
Where: P = a hypothetical initial payment of $1,000.
<S> <C> <C> <C>
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the stated periods at the end of the
stated periods.
</TABLE>
Performance for a specific period is calculated by first taking an investment
(assumed to be $1,000) ("initial investment") in the Fund's shares on the first
day of the period and computing the "ending value" of that investment at the end
of the period. The total return percentage is then determined by subtracting the
initial investment form the ending value and dividing the remainder by the
initial investment and expressing the result as a percentage. The calculation
assumes that all income and capital gains dividends paid by the Fund have been
reinvested at the net asset value of the Fund on the reinvestment dates during
the period. Total return may also be shown as the increased dollar value of the
hypothetical investment over the period.
Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship between these factors and their contributions to
total return.
59
<PAGE>
Comparisons
From time to time, in marketing and other Fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, may be cited. Lipper performance figures are
based on changes in net asset value with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. ("Morningstar"), which ranks funds on the
basis of historical risk and total return. Morningstar's rankings range from
five stars (highest to one star (lowest) and represent Morningstar's assessment
of the historical risk level and total return of a fund as a weighted average
for 3,5 and 10 year periods. Rankings are not absolute or necessarily predictive
of future performance.
Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning the Fund, including reprints of or selections
from, editorials or articles about the Fund. Sources for Fund performance and
articles about the Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News and World Report, the
Wall Street Journal, Barron's and a variety of investment newsletters.
The Fund may compare its performance to a wide variety of indices and
measures of inflation including the Standard & Poor's Index of 500 Stocks and
the NASDAQ Composite Index. There are differences and similarities between the
investments that the Fund may purchase for its portfolios and the investments
measured by these indices.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, [address to be supplied], independent accountants
for the Fund, audit and report on the Fund's financial statements.
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington,
D.C. 20036, serves as legal counsel to the Trust and the disinterested Trustees.
Robinson & Cole LLP, One Boston Place, Boston, Massachusetts, 02108, serves as
legal counsel to the Adviser and the Distributor.
FINANCIAL STATEMENTS
60
<PAGE>
The following financial statements of the Fund are contained herein:
(a) Report of Independent Accountants.*
(b) Statement of Assets and Liabilities.*
(c) Notes to Statement of Assets and Liabilities.*
- ----------------
*To be filed by Amendment
61
<PAGE>
PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Financial Statements (Included in Parts A and B)*
Report of Independent Accountants*
Statement of Assets and Liabilities*
(b) Exhibits
(1) Registrant's Declaration of Trust
(2) Registrant's By-Laws
(3) None
(4) Form of Investment Advisory Agreement with T.O.
Richardson Company, Inc.
(5) Form of Distribution Agreement with T.O. Richardson
Securities, Inc.
(6) None
(7) Form of Custodian Agreement with Firstar Trust Company
(8.1) Form of Transfer Agency Agreement with Firstar Trust
Company
(8.2) Form of Administration Agreement with Firstar Trust
Company
(8.3) Form of Fund Accounting Agreement with Firstar Trust
Company
(8.4) Fulfillment Servicing Agreement with Firstar Trust Company
(8.5) Form of Consent to Use of Name by Registrant with T.O.
Richardson Company, Inc.
(9) Opinion and Consent of Sullivan & Worcester LLP*
(10) Consent of Arthur Andersen LLP*
62
<PAGE>
(11) None
(12) Form of Subscription Agreement
(13) Individual Retirement Account Disclosure Statement and
Custodial Account*
(14) None
(15) Financial Data Schedule*
(16) None
- -----------------
*To be Filed by Amendment
Item 24. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is under common
control with any other person.
Item 25 Indemnification
Under the Registrant's Declaration of Trust and Bylaws, any past or
present Trustee or Officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him or her in connection with any action, suit or proceeding to which he or
she may be a party or is otherwise involved by reason of his or her being or
having been a Trustee or Officer of the Registrant. The Declaration of Trust and
Bylaws of the Registrant do not authorize indemnification where it is
determined, in the manner specified in the Declaration of Trust and the Bylaws
of the Registrant, that such Trustee or Officer has not acted in good faith in
the reasonable belief that his or her actions were in the best interest of the
Registrant. Moreover, the Declaration of Trust and Bylaws of the Registrant do
not authorize indemnification where such Trustee or Officer is liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, Officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, Officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Trustee, Officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the
63
<PAGE>
questions whether such indemnification is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The Registrant, its Trustees and Officers, its investment adviser, and
persons affiliated with them are insured under a policy of insurance maintained
by the Registrant and its investment adviser, within the limits and subject to
the limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might be
imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such Trustees or officers. The policy
expressly excludes coverage for any Trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been adjudicated or may be established or who willfully
fails to act prudently.
Item 26. Business and Other Connections of Investment Adviser and Subadviser
Besides serving as investment adviser to private accounts, the
Adviser is not currently and has not during the past two fiscal years engaged in
any other business, profession, vocation or employment of a substantial nature.
Information regarding the business, profession, vocation or employment of a
substantial nature of each of the Adviser's directors and officers is hereby
incorporated by reference from the information contained under "Fund
Organization and Management -- Management" in the Prospectus.
Item 27. Principal Underwriter
(a) T.O. Richardson Securities, Inc. ("TORSI") serves as Registrant's
Distributor. Registrant is the only investment company for which
the Distributor acts as principal underwriter.
(b) The principal business address of TORSI is Two
Bridgewater Road, Farmington, Connecticut 06032-2256.
The following information relates to each director
and officer of TORSI:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices with
Name With Underwriter Registrant
---- ---------------- ----------
<S> <C> <C>
Samuel Bailey, Jr. Chief Executive Officer Trustee, President and Treasurer
Lloyd P. Griffiths Vice President Trustee
L. Austine Crowe Vice President Vice President
Kathleen M. Russo Secretary Secretary
</TABLE>
Item 28. Location of Accounts and Records
64
<PAGE>
All accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder are in the possession of T.O. Richardson Company, Inc.,
Registrant's investment adviser, at Registrant's corporate offices, except
records held and maintained in Firstar Trust Company, Mutual Fund Services,
Third Floor, 615 E. Michigan Street, Milwaukee, Wisconsin 53202, relating to its
function as custodian, transfer agent, administrator, and fund accountant.
Item 29. Management Services
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
Item 30. Undertakings
None.
65
<PAGE>
NOTICE
The names "T.O. Richardson Trust" and "T.O. Richardson Sector Rotation Fund" are
the designations of the Trustees under the Declaration of Trust of the Trust
dated June 2, 1998, as amended from time to time. The Declaration of Trust has
been filed with the Secretary of State of The Commonwealth of Massachusetts and
the Clerk of the City of Boston, Massachusetts. The obligations of the
Registrant are not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders, officers, employees or
agents of the Registrant, but only the Registrant's property shall be bound.
66
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hartford and State of Connecticut on the 29th
day of June 1998.
T.O. RICHARDSON TRUST
/s/Samuel Bailey, Jr.
-------------------------
By: Samuel Bailey, Jr.
Trustee, President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-1A has been signed below by the following
person in the capacities and on the date indicated.
Name Title Date
Samuel Bailey, Jr. Trustee, President and Treasurer June 29, 1998
/s/Samuel Bailey, Jr.
-------------------------
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(1) Registrant's Declaration of Trust
(2) Registrant's By-Laws
(3) None
(4) Form of Investment Advisory Agreement with T.O. Richardson Company,
Inc.
(5) Form of Distribution Agreement with T.O. Richardson Securities, Inc.
(6) None
(7) Form of Custodian Agreement with Firstar Trust Company
(8.1) Form of Transfer Agency Agreement with Firstar Trust Company*
(8.2) Form of Administration Agreement with Firstar Trust Company
(8.3) Form of Fund Accounting Agreement with Firstar Trust Company
(8.4) Form of Fulfillment Servicing Agreement with Firstar Trust Company
(8.5) Form of Consent to Use of Name by Registrant with T.O. Richardson
Company, Inc.
(8.6) Consent to Service as a Trustee
(9) Opinion and Consent of Sullivan & Worcester LLP*
(10) Consent of Arthur Andersen LLP*
(11) None
(12) Form of Subscription Agreement
(13) [Individual Retirement Account Disclosure Statement and Custodial
Account*
(14) None
(15) Financial Data Schedule*
(16) None
- -----------------
<PAGE>
*To be Filed by Amendment
<PAGE>
DECLARATION OF TRUST
OF
T.O. RICHARDSON TRUST
2 Bridgewater Road
Farmington, Connecticut 06032
(Address of Principal Office)
W. Lee H. Dunham, Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(Name and Address of Registered Agent
in Massachusetts)
June 2, 1998
-1-
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I -- Name and Definitions............................................. 1
Section 1.1 Name.................................. ....1
Section 1.2 Definitions............................... 1
ARTICLE II -- Trustees.........................................................4
Section 2.1 Number of Trustees........................ 4
Section 2.2 Election or Appointment and Term...........4
Section 2.3 Resignation and Removal....................4
Section 2.4 Vacancies..................................4
ARTICLE III -- Powers of Trustees.......................................... ...5
Section 3.1 General....................................5
Section 3.2 Business and Investments...................5
Section 3.3 Legal Title................................7
Section 3.4 Issuance and Repurchase of Securities......7
Section 3.5 Borrowing Money; Lending Trust Assets......7
Section 3.6 Delegation; Committees.....................7
Section 3.7 Collection and Payment.....................7
Section 3.8 Expenses...................................8
Section 3.9 Litigation.................................8
Section 3.10 Miscellaneous Powers.......................8
Section 3.11 Manner of Acting; Bylaws...................9
ARTICLE IV -- Investment Adviser, Distributor, Custodian
and Shareholder Servicing Agent................................9
Section 4.1 Investment Adviser.........................9
Section 4.2 Distributor................................9
Section 4.3 Shareholder Servicing Agent...............10
Section 4.4 Custodian.................................10
Section 4.5 Parties to Agreements.....................10
ARTICLE V -- Limitations of Liability of Shareholders,
Trustees and Others............................................10
Section 5.1 No Personal Liability of
Shareholders, Trustees, etc.............10
Section 5.2 Non-Liability of Trustees, etc............11
-i-
<PAGE>
Section 5.3 Indemnification...........................11
Section 5.4 No Protection Against Certain
1940 Act Liabilities....................12
Section 5.5 No Bond Required of Trustees..............12
Section 5.6 No Duty of Investigation;
Notice in Trust Instruments, etc........12
Section 5.7 Reliance on Experts, etc..................12
ARTICLE VI -- Shares of Beneficial Interest...................................13
Section 6.1 Beneficial Interest..................... .13
Section 6.2 Rights of Shareholders....................13
Section 6.3 Trust Only.Section 6.4 Issuance of Shares.14
Section 6.5 Voting Powers.................... ........14
Section 6.6 Series of Shares.................. .......15
ARTICLE VII -- Redemptions............................................. ......17
Section 7.1 Redemptions......................... .....17
Section 7.2 Redemption of Shares for Tax Purposes;
Disclosure of Holding.............. ....17
Section 7.3 Redemptions to Reimburse Trust
for Loss on Nonpayment for Shares
or for Other Charges................ ...18
Section 7.4 Redemptions Pursuant to Constant
Net Asset Value Policy............... ..18
Section 7.5 Payment for Redeemed Shares in Kind..... .18
Section 7.6 Repurchase of Shares by Agreement
with Shareholder....................... 18
ARTICLE VIII -- Determination of Net Asset Value, Net Income and Dividends and
Distributions.................................................19
Section 8.1 Net Asset Value...........................19
Section 8.2 Net Income................................19
Section 8.3 Dividends and Distributions...............19
Section 8.4 Power to Modify Foregoing Procedures......20
ARTICLE IX -- Duration; Termination of Trust;
Amendment; Mergers, etc.......................................20
Section 9.1 Duration..................................20
Section 9.2 Termination of Trust......................20
Section 9.3 Amendment Procedure.......................21
-ii-
<PAGE>
Section 9.4 Merger, Consolidation and
Sale of Assets..........................21
Section 9.5 Incorporation.............................21
ARTICLE X -- Financial Reports; Books and Records.............................22
ARTICLE XI -- Miscellaneous...................................................22
Section 11.1 Filing....................................22
Section 11.2 Resident Agent............................22
Section 11.3 Governing Law.............................23
Section 11.4 Counterparts..............................23
Section 11.5 Reliance by Third Parties.................23
Section 11.6 Provisions in Conflict with
Law or Regulations......................23
Section 11.7 Use of the Names "T.O. Richardson" and
"Richardson". .........................23
-iii-
<PAGE>
DECLARATION OF TRUST
OF
T.O. RICHARDSON TRUST
June 2, 1998
DECLARATION OF TRUST of T.O. Richardson Trust made the 2nd day of June,
1998, by the person named at the foot of this Declaration of Trust, as trustee
(such individual, so long as he shall continue in office in accordance with the
provisions of this Declaration of Trust, and all other individuals who may
hereafter be duly elected or appointed, qualified and serving as trustees in
accordance with the provisions hereof, being hereinafter called "Trustees"):
THE TRUSTEES hereby declare that all money and property contributed to
the trust established hereby shall be held and managed in trust for the benefit
of the holders from time to time of the shares of beneficial interest issued
hereunder and subject to the provisions hereof, to wit:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust established hereby (the
"Trust") is "T.O. Richardson Trust" and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under that name, which name (and the word "Trust" wherever herein used)
shall refer to the Trustees as trustees, and not as individuals, or personally,
and shall not refer to the officers, agents, employees or Shareholders of the
Trust. If the Trustees determine that the Trust's use of such name is not
advisable or if the Trust is required to discontinue the use of such name
pursuant to Section 11.7 hereof, then subject to that section the Trustees may
adopt such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the respective meanings assigned to them below:
(a) the terms "Affiliated Person" and "Commission" have the meanings
assigned to them in the 1940 Act.
(b) "Bylaws" means the Bylaws referred to in Section 3.11 hereof, as
amended and in effect from time to time.
-1-
<PAGE>
(c) "Declaration" means this Declaration of Trust, as amended and in
effect from time to time. Reference in this Declaration of Trust to
"Declaration," "hereof," "herein," "hereby" and "hereunder" shall be deemed to
refer to this Declaration rather than the article or section in which such words
appear.
(d) "Distributor" means a party, other than the Trust, to an agreement
described in Section 4.2 hereof.
(e) "Fundamental Policies" as used with respect to any Series or Class
of Shares of the Trust, means the investment policies and restrictions
applicable to such Series or Class which are set forth in the Prospectus or the
Statement of Additional Information relating to such Series or Class and are
designated therein as fundamental policies.
(f) "Investment Adviser" means a party, other than the Trust, to an
agreement described in Section 4.1 hereof.
(g) "Majority Shareholder Vote," means the action by written consent or
vote of a plurality of all outstanding Shares of the Trust and/or as required,
of each Series and Class of Shares of the Trust entitled to vote thereon,
provided that, if such action is at a meeting of Shareholders, such plurality
shall be of such Shares represented in person or by proxy, if a quorum (as
determined in accordance with the Bylaws) is present; provided, that as used
with respect to any action requiring the affirmative vote of "a majority of the
outstanding voting securities" of the Trust, as the quoted phrase is defined in
the 1940 Act, "Majority Shareholder Vote" means the vote for such action at a
meeting of Shareholders of the smallest percentage of all outstanding Shares (or
of Shares of any particular Series or Class) of the Trust entitled to vote on
such action which satisfies such 1940 Act voting requirement.
(h) "1940 Act" means the provisions of the Investment Company Act of
1940 and the rules and regulations thereunder as amended from time to time and
any order or orders thereunder which may from time to time be applicable to the
Trust.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(j) "Prospectus" as used with respect to any Shares of the Trust, means
the prospectus relating to such Shares, which constitutes part of the currently
effective Registration Statement of the Trust under the Securities Act of 1933,
as such prospectus may be amended or supplemented from time to time.
(k) "Shareholder" means a record holder of outstanding Shares.
-2-
<PAGE>
(l) "Shareholder Servicing Agent" means the party, other than the
Trust, to the agreement described in Section 4.3 hereof.
(m) "Shares" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the Shares
of any and all Series and Classes which may be established and designated hereby
or by the Trustees hereunder, and includes fractions of Shares as well as whole
Shares. "Series" or "Class" means the Shares representing the beneficial
interest in one of the separate Series or Classes of Shares of the Trust which
are established and designated in Section 6.1 hereof or which may be established
and designated from time to time by the Trustees pursuant to that section. All
references to Shares in this Declaration which are not accompanied by a
reference to any particular Series or Class of Shares shall be deemed to apply
to all outstanding Shares of any or all Series and Classes.
(n) "Single Class Voting," as used with respect to any matter to be
acted upon at a meeting or by written consent of Shareholders, means that on
such matter each holder of one or more Shares shall be entitled to one vote for
each Share standing in his or her name on the records of the Trust, irrespective
of Series or Class, as applicable, and all outstanding Shares of all Series or
Classes, as applicable, vote as a single Class.
(o) "Statement of Additional Information," as used with respect to any
Shares of the Trust, means the statement of additional information relating to
such Shares, which constitutes part of the currently effective Registration
Statement of the Trust under the Securities Act of 1933, as such statement of
additional information may be amended or supplemented from time to time.
(p) "Trust" means the trust established hereby by whatever name it may
then be known.
(q) "Trust Property" means any and all assets and property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust or the Trustees.
(r) "Trustees" means the individuals who have signed this Declaration,
so long as they shall continue in office in accordance with the provisions
hereof, and all other individuals who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and reference herein to Trustee or the Trustees shall refer to such
individual or individuals in their capacity as trustees hereunder.
-3-
<PAGE>
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
not be less than one (1).
Section 2.2. Election or Appointment and Term. The initial Trustees
shall be the individuals signing this Declaration in that capacity. Thereafter,
subject to Section l6(a) of the 1940 Act, the Trustees may elect or appoint
themselves or their successors at such regular intervals, if any, as they deem
proper, and may appoint Trustees to fill vacancies as provided in Section 2.4
hereof; provided, that Trustees shall be elected by a Majority Shareholder Vote
and at such time or times as the Trustees shall determine that such action is
required under Section 16(a) of the 1940 Act or, if not so required, that such
action is advisable. Subject to Section 2.3 hereof, the Trustees shall have the
power to set and alter the terms of office of the Trustees, and they may at any
time lengthen or shorten their own terms or make their terms of unlimited
duration; provided, that the term of office of any incumbent Trustee shall
continue until terminated as provided in Section 2.4 hereof or, if not so
terminated, until the election of such Trustee's successor in office has become
effective in accordance with this Section 2.2.
Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees, and such resignation shall be
effective upon such delivery or at any later date according to the terms of the
instrument. Any of the Trustees may be removed by the action of two-thirds of
the remaining Trustees; provided, that if the removal of one or more Trustees
would have the effect of reducing the number of remaining Trustees below the
minimum number prescribed by Section 2.1 hereof, then subject to Section 16(a)
of the 1940 Act, at the time of the removal of such Trustee or Trustees, the
remaining Trustees shall elect or appoint a number of additional Trustees at
least sufficient to increase the number of Trustees holding office to the
minimum number prescribed by Section 2.1 hereof. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
his name. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence. However, the execution and
delivery of such documents by a former Trustee or his legal representative shall
not be requisite to the vesting of title to the Trust Property in the remaining
Trustees as provided in Section 3.3 hereof.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of such Trustee's death, resignation,
removal,
-4-
<PAGE>
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees, or, if only
one Trustee shall then remain in office, the sole remaining Trustee, shall
appoint such individual to fill such vacancy as they or he, in their or his
discretion, shall see fit. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement or
resignation of a Trustee or an increase in the number of Trustees; provided,
that such appointment shall not become effective prior to such retirement or
resignation or such increase in the number of Trustees. Whenever a vacancy in
the number of Trustees shall occur, until such vacancy is filled as provided in
this Section 2.4, the Trustees in office, regardless of their number, shall have
all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A written instrument certifying
the existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Business and Investments. The Trustees shall have the power
with respect to the Trust and its assets and Shares:
-5-
<PAGE>
(a) to conduct, operate and carry on the business of an investment
company, either directly or through one or more wholly-owned subsidiaries, and
in connection therewith:
(i) to subscribe for, purchase or otherwise acquire and invest
and reinvest in, to hold for investment or otherwise, to sell,
transfer, assign, negotiate, exchange, lend or otherwise dispose of,
and to turn to account or realize upon and generally deal in and with
(a) securities (which term, "securities," shall include without
limitation any and all bills, notes, bonds, debentures or other
obligations or evidences of indebtedness, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements or other
money market instruments; stocks, shares or other equity ownership
interests; and warrants, options or other instruments representing
rights to subscribe for, purchase, receive or otherwise acquire or to
sell, transfer, assign or otherwise dispose of, and scrip,
certificates, receipts or other instruments evidencing any ownership
rights or interests in, any of the foregoing or in indices of any of
the foregoing), "when issued" and "delayed delivery" contracts for
securities, issued, guaranteed or sponsored by any governments,
political subdivisions or governmental authorities, agencies or
instrumentalities, by any individuals, firms, companies, corporations,
syndicates, associations or trusts, or by any other organizations or
entities whatsoever, irrespective of their forms or the names by which
they may be described, whether or not they be organized and operated
for profit, and whether they be domestic or foreign with respect to The
Commonwealth of Massachusetts or the United States of America, and
options or other instruments entered into on a national securities
exchange relating to foreign currencies; (b) futures contracts and
forward contracts with respect to instruments described in
3.2(a)(i)(a), futures contracts on indices of such instruments, and
options on all contracts described in this subsection 3.2(a)(i)(b); (c)
precious metals and other minerals, contracts to purchase and sell, and
other interests of every nature and kind in, such metals or minerals;
and (d) rare coins and other numismatic items; and
(ii) to acquire and become the owner of or interested in any
securities by delivering or issuing in exchange or payment therefor, in
any lawful manner, any of the Trust Property; and
(iii) to exercise all rights, powers and privileges relating
to, and to do all acts and things to protect or enhance the value of
securities or interests held.
The Trustees shall not be limited by any law limiting the investments which may
be made by fiduciaries; and
(b) to conduct, operate, carry on and engage in any other lawful
business and activity which to such extent and manner as the Trustees, in their
sole and absolute discretion, may determine.
-6-
<PAGE>
Section 3.3. Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants, except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee as provided in Section 2.2 or 2.4
hereof, such Trustee shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered as provided in Section
2.3 hereof.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares of the
Trust, and, subject to Articles VII, VIII and IX hereof, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or other assets of the Trust, whether constituting capital or surplus or
otherwise, to the full extent now or hereafter permitted by applicable law.
Section 3.5. Borrowing Money; Lending Trust Assets. Subject to any
applicable Fundamental Policies of the Trust or any applicable provision of the
Bylaws, the Trustees shall have power to borrow money or otherwise obtain credit
and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Trust, to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other Person and to
lend Trust Property.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such committee or
committees as they may from time to time appoint from among their own number or
to such officers, employees or agents of the Trust as they may from time to time
designate the doing of such things and the execution of such instruments either
in the name of the Trust or the names of the Trustees or otherwise as the
Trustees may deem expedient.
Section 3.7. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
-7-
<PAGE>
Section 3.8. Expenses. The Trustees shall have the power to incur and
pay any expenses which, in the opinion of the Trustees, are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees
of the Trust.
Section 3.9. Litigation. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust or the Trust Property, and, out of the Trust Property, to
pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to consent to the
dismissal of any action, suit, proceeding, dispute, claim, or demand, derivative
or otherwise, brought by any person, including a Shareholder in such
Shareholder's own name or in the name of the Trust, whether or not the Trust or
any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
Section 3.10. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, subject to and in accordance with
Sections 2.3 and 2.4 hereof; elect and remove at will such officers and appoint
and terminate such agents or employees as they consider appropriate; and appoint
from their own number and terminate at will any one or more committees which may
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; (d) purchase, and pay for out of Trust Property, insurance
policies insuring the Trust Property, and, to the extent permitted by law and
not inconsistent with any applicable provision of this Declaration or the
Bylaws, insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted to be taken by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) indemnify any person with whom the Trust has dealings, including
the Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers and independent contractors of the Trust, to such
extent permitted by law and not inconsistent with any applicable provision of
the Bylaws as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year of
the Trust and the method by which its accounts shall be kept; and (i) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust.
-8-
<PAGE>
Section 3.11. Manner of Acting; Bylaws. Except as otherwise provided
herein, in the Bylaws or in any applicable provision of law, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other, or
by written consent or consents of all the Trustees. The Trustees shall adopt
Bylaws not inconsistent with this Declaration to provide for the conduct of the
business of the Trust and may amend or repeal such Bylaws to the extent such
power is not reserved to the Shareholders by express provision of such Bylaws.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN
AND SHAREHOLDER SERVICING AGENT
Section 4.1. Investment Adviser. The Trustees may in their discretion
from time to time enter into investment advisory or management agreements
whereby an Investment Adviser which is the other party to any such contract
shall undertake to furnish the Trust such management, investment advisory or
supervisory, administrative, accounting, legal, statistical and research
facilities and services, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all upon such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
and any applicable provisions of the Bylaws of the Trust. To the extent required
by the 1940 Act or other applicable law or regulations, any such advisory or
management agreement and any amendment thereto shall be subject to approval by a
Majority Shareholder Vote at a meeting of the Shareholders of the Trust.
Notwithstanding any provisions of this Declaration, the Trustees may authorize
any Investment Adviser (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of portfolio securities of the Trust on behalf of the Trustees or may
authorize any officer or employee of the Trust or any Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any
Investment Adviser (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees. The Trustees may, in their sole discretion, call a meeting
of Shareholders in order to submit to a vote of Shareholders at such meeting the
approval of continuance of any such investment advisory or management agreement.
If the Shareholders of any one or more Series or Classes of Shares should fail
to approve any such investment advisory or management agreement, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
or Class whose Shareholders approve such contract.
Section 4.2. Distributor. The Trustees may in their discretion from time to
time enter into agreements providing for the sale of Shares to net the Trust not
less than the
-9-
<PAGE>
net asset value (or such other amount as may be permitted by law) per Share (as
described in Article VIII hereof) and pursuant to which the Trust may appoint
the other party to any such agreement as its sales agent for the distribution of
such Shares. Each such agreement shall contain such terms and conditions as the
Trustees may in their discretion determine to be not inconsistent with this
Declaration, the applicable provisions of the 1940 Act and any applicable
provisions of the Bylaws of the Trust.
Section 4.3. Servicing Agreements. The Trustees may in their discretion
from time enter into servicing agreements whereby another party to such
agreement(s) shall undertake to furnish transfer agency, shareholder and
dividend disbursing services, administrative services and/or fund accounting
services to the Trust and its Shareholders. The agreement(s) shall contain such
terms and conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration and any applicable provisions of the 1940 Act
and the Bylaws of the Trust.
Section 4.4. Custodian. The Trustees may appoint a bank or trust
company having an aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least two million dollars ($2,000,000) as
custodian of the securities and cash of the Trust. The custodian agreement shall
contain such terms and conditions as the Trustees in their discretion determine
to be not inconsistent with this Declaration, the applicable provisions of the
1940 Act and any applicable provisions of the Bylaws of the Trust.
Section 4.5. Parties to Agreements. The Trustees may enter into any
agreement of the character described in Section 4.1, 4.2, 4.3 or 4.4 of this
Article IV and into any other agreement although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder or
member of, or otherwise interested in, any other party to the agreement, and no
such agreement shall be invalidated or rendered voidable by reason of the
existence of any such relationship; nor shall any Person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said agreement or accountable for any
profit realized directly or indirectly therefrom. The same Person or an
Affiliated Person of any Person may be the other party to two or more of the
agreements entered into pursuant to Sections 4.1, 4.2, 4.3 or 4.4 above or
otherwise, and any individual may be financially interested in or otherwise
affiliated with any Person who is a party to any of the agreements mentioned in
this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. Subject to
-10-
<PAGE>
Section 5.4 hereof, no Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the Trust
or its Shareholders, in connection with Trust Property or the affairs of the
Trust, and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee or agent, as such, of
the Trust is made a party to any suit or proceeding to enforce any such
liability, he shall not, on account thereof, be held to any personal liability.
The Trust shall indemnify and hold each Shareholder harmless from and against
all claims and liabilities to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided, that such indemnity or
reimbursement shall be made from assets (or proceeds thereof or income
therefrom) of the one or more Series or Classes of Shares of the Trust of which
such Shareholder is a holder and in respect of which such claim or liability
arose and not from the assets (or proceeds or income therefrom) of any other
Series or Classes of Shares of the Trust. The rights accruing to a Shareholder
under this Section 5.1 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 5.2. Non-Liability of Trustees, etc. Subject to Section 5.4
hereof, no Trustee, officer, employee or agent of the Trust shall be liable to
the Trust or to any Shareholder, Trustee, officer, employee or agent of the
Trust for any action or failure to act (including without limitation the failure
to compel in any way any former or acting Trustee to redress any breach of
trust).
Section 5.3. Indemnification.
(a) Subject to Section 5.4 hereof, the Trustees shall provide for
indemnification by the Trust of every Person who is, or has been, a Trustee,
officer, employee or agent of the Trust, or of any other entity of the Trust's
request, against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof in such manner, to such extent and subject to such
condition and limitations as the Trustees may provide from time to time in the
Bylaws; provided, that, to the extent any claim, action, suit or proceeding
involves any act or omission of such Person in respect of one or more particular
Series or Classes of Shares of the Trust or the assets or operations of such one
or more Series or Classes of Shares, such indemnification shall be provided only
from the assets (or proceeds thereof or income therefrom) of such one or more
Series or Classes of Shares and not from the assets (or proceeds thereof or
income therefrom) of any other Series or Class of Shares of the Trust.
-11-
<PAGE>
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Section 5.4. No Protection Against Certain 1940 Act Liabilities.
Nothing contained in Sections 5.1, 5.2 or 5.3 hereof or in any provision of the
Bylaws referred to in Section 5.3 hereof shall protect any Trustee or officer of
the Trust from any liability to the Trust or its Shareholders for which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Nothing contained in Sections 5.1, 5.2 or 5.3 hereof or in any agreement
of the character described in Section 4.1 or 4.2 hereof shall protect any
Investment Adviser to the Trust or Distributor of its Shares against any
liability to the Trust or its Shareholders to which he or it would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his or its duties to the Trust, or by reason of his or its
reckless disregard of his or its obligations and duties under the agreement
pursuant to which he or it serves as Investment Adviser to the Trust or
Distributor of its Shares.
Section 5.5. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 5.6. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with the Trustees or with any
officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every contract, undertaking, instrument,
certificate, Share or obligation or other security of the Trust, and every other
act or thing whatsoever executed in connection with the Trust, shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written agreement,
contract, instrument, undertaking, certificate, Share or other security of the
Trust executed, made or issued by the Trustees shall recite that the same is
executed, made or issued by them not individually, but as Trustees under this
Declaration, and that the obligations created or evidenced thereby are not
binding upon any of the Trustees or Shareholders individually, but bind only the
Trust Property, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees or Shareholders individually.
Section 5.7. Reliance on Experts, etc. Each Trustee, officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith
-12-
<PAGE>
upon the books of account or other records of the Trust, upon an opinion of
counsel, or upon reports made to the Trust by any of its officers or employees
or by the Investment Adviser, the Distributor, Shareholder Servicing Agent,
selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the Trust shall be
divided into transferable units to be called Shares of Beneficial Interest,
without par value. The number of such Shares of Beneficial Interest authorized
hereunder is unlimited. Except as otherwise provided in this Section 6.1 and in
Section 6.6 hereof, each Share shall represent an equal proportionate share in
the net assets of the Trust. Without limiting the authority of the Trustees set
forth herein to establish and designate any further Series or Classes, there is
hereby established three Series of Shares to be known as "T.O. Richardson Sector
Rotation Fund," "T.O. Richardson Enhanced Index Fund," and "T.O. Richardson
Enhanced Index Institutional Fund." Each Share of any Series or Class shall
represent an equal proportionate share in the net assets of that Series or Class
with each other Share of that Series or Class. The Trustees may divide or
combine the Shares of any Series or Class into a greater or lesser number of
Shares of that Series or Class without thereby changing the proportionate
interests in the assets of that Series or Class. Subject to the provisions of
Section 6.6 hereof, the Trustees may also authorize the creation of additional
Series or Classes of Shares (the proceeds of which may, if desired, be invested
in separate, independently managed portfolios of securities. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend or distribution in Shares or a division of Shares, shall be fully paid
and nonassessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described shall be vested exclusively in the Trustees, and the Shareholders
shall have no interest therein other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition or division
of any property, profits, rights or interests of the Trust nor can they be
called upon to assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration.
Shares shall not entitle any holder thereof to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine.
Section 6.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership,
-13-
<PAGE>
limited partnership, joint stock association, corporation, bailment or any form
of legal relationship other than a trust. Nothing in this Declaration shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
Section 6.4. Issuance of Shares. The Trustees in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any Series
or Class in addition to the then issued and outstanding Shares and Shares held
in the treasury, to such party or parties and for consideration in such amount
not less than the net asset value (or such other amount as may be permitted by
law) per Share (determined as set forth in Article VIII hereof) and of such
type, including cash or property, at such time or times and on such terms as the
Trustees may deem fitting, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with, the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. Reductions in the number of
outstanding Shares of any Series or Class with respect to which the Trustees
shall have established a policy of maintaining a constant net asset value per
Share of such Series or Class may be made pursuant to the provisions of Section
7.4 hereof in order to maintain the constant net asset value per share of such
Series. Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and fractions of a Share as described in the
Prospectus or the Statement of Additional Information.
Section 6.5. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof and the
removal of Trustees to the extent provided in Section 16(c) of the 1940 Act,
(ii) with respect to approval or termination in accordance with the 1940 Act of
any investment advisory or management agreement described in Section 4.1 hereof,
(iii) with respect to termination of the Trust as provided in Section 9.2
hereof, (iv) with respect to any amendment of this Declaration to the extent and
as provided in Section 9.3 hereof, (v) to the same extent as the stockholders of
a Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (vi) with
respect to such additional matters relating to the Trust as may be required by
this Declaration, the Bylaws or any undertaking filed by the Trust with the
Commission (or any successor agency) or with any state, or as to which the
Trustees in their discretion shall determine such Shareholder vote to be
required by law or otherwise to be necessary, appropriate or advisable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote, except that Shares held in the treasury of the Trust as of the
record date, as determined in accordance with the Bylaws, shall not be voted.
There shall be no cumulative voting of Shares in any election of Trustees. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, this Declaration or the Bylaws to be taken by
Shareholders. The Bylaws may include further provisions relating to
Shareholders' votes and meetings and related matters.
-14-
<PAGE>
Section 6.6. Series of Shares. The following provisions are applicable
regarding the Series of Shares of the Trust established and designated by
Section 6.1 hereof and shall be applicable to the extent the Trustees shall
provide in respect of the establishment and designation of additional Series or
Classes as provided in that section:
(a) The number of authorized Shares and the number of Shares of each
Series or Class that may be issued shall be unlimited. The Trustees may classify
or reclassify any Shares of any Series or Class whether or not previously issued
or outstanding. The Trustees may hold as treasury Shares and reissue as Shares
(of the same or some other Series or Class), for such consideration as provided
in Article VIII hereof and on such terms as they may determine, or cancel, any
Shares of any Series or Class reacquired by the Trust in their discretion from
time to time.
(b) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from reinvestment
of such proceeds in whatever form the same may be, shall irrevocably belong to
that Series or Class, for all purposes subject only to the rights of creditors,
and shall be so recorded upon the books of account of the Trust. In the event
that there are any assets, income, earnings, profits, and proceeds thereof,
funds or payments which are not readily identifiable as belonging to any
particular Series or Class, the Trustees shall allocate them among any one or
more of the Series or Class, established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series and Classes for all purposes.
(c) The assets belonging to each particular Series or Class shall be
charged with the liabilities of the Trust in respect of that Series or Class and
all expenses, costs, charges and reserves attributable to that Series or Class,
and any general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular Series or
Class shall be allocated and charged by the Trustees to and among any one or
more of the Series or Class established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs, charges and reserves
by the Trustees shall be conclusive and binding upon the holders of all Series
and Classes for all purposes.
(d) The power of the Trustees to pay dividends and to make
distributions shall be governed by Section 8.3 of this Declaration with respect
to any one or more Series or Classes which represent the beneficial interests in
separately managed components of the Trust assets immediately prior to the
establishment and designation of any additional Series or Class. With respect to
any other Series or Class, dividends and
-15-
<PAGE>
distributions on Shares of a particular Series or Class may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of such Shares of that
Series or Class, from such of the income and capital gains, accrued or realized,
from the assets belonging to that Series or Class as the Trustees may determine,
after providing for actual and accrued liabilities belonging to that Series or
Class. All dividends and distributions on Shares of a particular Series or Class
shall be distributed pro rata to the holders of that Series or Class in
proportion to the number of Shares of that Series or Class held by such holders
at the date and time of record established for the payment of such dividends or
distributions.
(e) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and dividend
rights, of each Series or Class of Shares. Subject to the provisions of Section
6.1 and this Section 6.6, all Shares of all Series or Classes shall have
identical rights and privileges, except insofar as variations thereof among
Series or Classes shall have been determined and fixed by the Trustees.
(f) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of any
Series or Class shall have the right to convert or exchange said Shares for or
into Shares of one or more other Series or Class in accordance with such
requirements and procedures as may be established by the Trustees.
(g) The establishment and designation of any Series or Class of Shares
in addition to those established and designated in Section 6.1 hereof shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights,
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such Series or Class
or as otherwise provided in such instrument. At any time that there are no
Shares outstanding of any particular Series or Class previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that Series or Class and the establishment and designation
thereof.
(h) In the event of the liquidation of a particular Series, or Class
the Shareholders of that Series or Class which has been established and
designated and which is being liquidated shall be entitled to receive, when and
as declared by the Trustees, the excess of the assets belonging to that Series
or Class over the liabilities belonging to that Series or Class. The holders of
Shares of any Series or Class shall not be entitled thereby to any distribution
upon liquidation of any other Series or Class. The assets so distributable to
the Shareholders of any Series or Class shall be distributed among such
Shareholders in proportion to the number of Shares of that Series or Class held
by them and recorded on the books of the Trust. The liquidation of
-16-
<PAGE>
any particular Series or Class in which there are Shares then outstanding may be
authorized by vote or written consent of a majority of the Trustees then in
office.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder of a particular Series or
Class shall have the right, if any, at such times as may be permitted by the
Trust, to require the Trust to redeem all or any part of his Shares of that
Series or Class, upon and subject to the terms and conditions provided in this
Article VII. The Trust shall, upon application of or pursuant to authorization
from any Shareholder, redeem from such Shareholder outstanding Shares for an
amount per Share determined by the Trustees in accordance with the 1940 Act;
provided, that (i) such amount per Share shall not exceed the cash equivalent of
the proportionate interest of each Share of that Series or Class in the Trust
Property at the time of the redemption, and (ii) if so authorized by the
Trustees, the Trust may, at any time and from time to time charge fees for
effecting such redemption, at such rates as the Trustees may establish, if and
to the extent permitted under the 1940 Act, and may, at any time and from time
to time, pursuant to the 1940 Act suspend such right of redemption. Redemption
and suspension and resumption of redemption of Shares shall be effected in
accordance with the procedures, and payment for Shares redeemed shall be made in
the manner, set forth in the Prospectus or the Statement of Additional
Information relating to such Shares.
Section 7.2. Redemption of Shares for Tax Purposes; Disclosure of
Holding. If the Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares of the Trust (or of any Series of
Shares of the Trust) has or may become concentrated in any Person to an extent
which would disqualify the Trust (or such Series) as a regulated investment
company under the Internal Revenue Code, then the Trustees shall have the power
by lot or other means deemed equitable by them (i) to call for redemption from
any such Person a number, or principal amount, of Shares of the Trust (or of
such Series) sufficient, in the opinion of the Trustees, to maintain or bring
the direct or indirect ownership of Shares of the Trust (or of such Series) into
conformity with the requirements for such qualification, and (ii) to refuse to
transfer or issue Shares of the Trust (or of such Series) to any Person whose
acquisition of the Shares of the Trust (or of such Series) would, in the opinion
of the Trustees, result in such disqualification. The redemption shall be
effected at a redemption price determined in accordance with Section 7.1 hereof.
The holders of Shares of the Trust shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees deem necessary to comply with
the provisions of the Internal Revenue Code of 1986, as amended or any successor
statute, or to comply with the requirements of any other authority.
-17-
<PAGE>
Section 7.3. Redemptions to Reimburse Trust for Loss on Nonpayment for
Shares or for Other Charges. The Trustees shall have the power to redeem Shares
owned by any Shareholder to the extent necessary (i) to reimburse the Trust for
any loss it has sustained by reason of the failure of such Shareholder to make
full payment for Shares purchased by such Shareholder, or (ii) to collect any
charge relating to a transaction effected for the benefit of such Shareholder
which is applicable to Shares as provided in the Prospectus. Any such redemption
shall be effected at the redemption price determined in accordance with Section
7.1 hereof.
Section 7.4. Redemptions Pursuant to Constant Net Asset Value Policy.
The following provisions shall apply to any Series of the Trust during any
period that the Trustees, in their discretion, establish a policy of maintaining
a constant net asset value per Share. If for any reason the net income of the
Trust attributable to such Series or Class shall, at the time of any
determination thereof in accordance with Section 8.2 hereof, be a negative
amount, then the Trustees shall have power to cause the number of outstanding
Shares of such Series or Class to be reduced by requiring each Shareholder to
contribute to the capital of the Trust such Shareholder's proportionate part of
the total number of Shares of such Series or Class which have an aggregate
current net asset value equal as nearly as may be practicable to the negative
amount of the Trust's net income. Each Shareholder, by becoming a registered
holder of Shares, agrees to make any such contribution which may be required.
Section 7.5. Payment for Redeemed Shares in Kind. Subject to any
applicable provisions of the 1940 Act, payment for any Shares redeemed pursuant
to Section 7.1 or 7.2 hereof may, at the option of the Trustees or such officer
or officers of the Trust as they may authorize for the purpose, be made in cash
or in kind, or partially in cash and partially in kind, and, in case of full or
partial payment in kind, the Trustees or such authorized officer or officers
shall have absolute discretion to determine the securities or other assets of
the Trust and the amount thereof to be distributed in kind. For such purpose,
the value of any securities or other noncash assets delivered in payment for
Shares redeemed shall be determined in the same manner as the value of such
securities or other noncash assets are determined in accordance with Section 8.1
hereof for purposes of determining the net asset value per Share applicable to
such Shares, as of the same time that the net asset value per Share applicable
to such Shares is determined.
Section 7.6. Repurchase of Shares by Agreement with Shareholder. The
Trust may repurchase its Shares from any Shareholder directly or through an
agent designated by it for the purpose, by agreement with such Shareholder, at a
price not exceeding the redemption price of such Shares determined pursuant to
Section 7.1 hereof.
-18-
<PAGE>
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DIVIDENDS AND DISTRIBUTIONS
Section 8.1. Net Asset Value. Subject to the applicable provisions of
the 1940 Act, the Trustees shall have the power and duty to cause the net asset
value per Share of each Series or Class of outstanding Shares of the Trust to be
determined in such manner, with such frequency and at such specific time of day
as shall be set forth in or prescribed by the Trustees in accordance with the
Bylaws. The Trustees may delegate the power and duty to determine the net asset
value per Share of any Series or Class of outstanding Shares to one or more of
their number, or to one or more officers of the Trust, or to any Investment
Adviser, custodian, Shareholder Servicing Agent, or other agent appointed for
the purpose by the Trust.
Section 8.2. Net Income. Subject to any applicable provisions of the
1940 Act, the Trustees shall have the power and duty to cause the net income
attributable to each Series or Class of the Trust to be determined on an accrual
basis with the same frequency and at the same time of day as the net asset value
per Share of such Series or Class of the Trust is determined in accordance with
Section 8.1 hereof. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine whether any cash or property of the
Trust shall be treated as income or as principal and whether any item of expense
shall be charged to the income or the principal account, and their determination
shall be conclusive upon the Shareholders. In the case of stock dividends
received, the Trustees shall have full discretion to determine, in the light of
the particular circumstances, how much, if any, of the value thereof shall be
treated as income, and the balance, if any, shall be treated as principal.
Section 8.3. Dividends and Distributions. The Trustees shall have the
power to declare and pay ratably to the Shareholders of any Series or Class as
dividends or distributions on their Shares, such proportion of the net income,
capital gains, surplus (including paid-in surplus), capital or assets of such
Series or Class as the Trustees may deem proper. Dividends and distributions on
any Series or Class of Shares may be paid with such frequency (which may be
daily or at such other intervals as shall be specified in a standing resolution
or resolutions adopted by the Trustees) and may be paid in cash or other
property, or in additional Shares, in such manner, at such times, and on such
terms as the Trustees shall determine. Dividends and distributions may be paid
to the Shareholders of record at the time of declaring the dividend or
distribution or to the Shareholders of record at such other date as the Trustees
shall determine. The Trustees may always retain from the net income of the Trust
such amount as they may deem necessary to pay debts or expenses or to meet
obligations of the Trust or as they may deem desirable to use in the conduct of
the affairs or to retain for future requirements of the business of the Trust.
-19-
<PAGE>
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books of the Trust,
the foregoing provisions of this Section 8.3 shall be interpreted to give the
Trustees the power in their discretion to distribute for any fiscal year as
income dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust to avoid or reduce liability for taxes.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
asset value per Share of outstanding Shares, the net income of the Trust, or for
the declaration and payment of dividends and distributions, as they may deem
necessary or desirable to enable the Trust to comply with any provision of the
1940 Act, including without limitation any rule or regulation adopted pursuant
to Section 22 of the 1940 Act by the Commission.
ARTICLE IX
DURATION; TERMINATION OF
TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust. (a) The Trust or any Series or Class may
be terminated by the vote or written consent of a majority of the Trustees. Upon
any such termination:
(i) The Trust, Series or Class terminated shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust, Series or Class terminated and all of the powers of the Trustees
under this Declaration shall continue until the affairs of the Trust,
Series or Class terminated shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust, Series or
Class, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of its remaining Trust Property to
one or more persons at public or private sale for consideration which
may consist in whole or in part of cash, securities or other property
of any kind and discharge or pay its liabilities, and to do all other
acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property of the Trust,
Series or Class terminated in cash or in
-20-
<PAGE>
kind or partly each, among its Shareholders according to their
respective rights and interests.
(b) After termination of the Trust and distribution to the Shareholders
as herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders of the Trust, Series or Class terminated shall thereupon cease.
Section 9.3. Amendment Procedure. (a) This Declaration or any
provisions establishing any Series or Class may be amended by a vote or written
consent of a majority of the Trustees. However, if any such amendment materially
adversely affects the rights of any Shares of any Series or any Class with
respect to matters to which such amendment is applicable, such amendment shall
be subject to approval by holders of a majority of the Shares of such Series or
Class. An amendment or other action which provides for an additional Series of
Shares (and/or Class thereof), which Series may vote together with Shares of
other Series (and/or Classes thereof) and makes other provisions with respect to
such Series (and/or Class thereof) and its relation to existing Series (and/or
Classes thereof), shall not be deemed to adversely affect the rights of any
other Series of Shares or Class thereof. The Trustees may also amend this Trust
Agreement without any Shareholder approval to change the name of the Trust, or
any Series or Class thereof, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision thereof, or, if
they deem it necessary, to conform this Trust Agreement to the requirements of
applicable federal laws or regulations or the requirements of the Internal
Revenue Code, or to eliminate or reduce any federal, state or local taxes which
are or may be payable by the Trust or the Shareholders or to amend the
investment restrictions set forth in Article III, Section 3.2 of this Trust
Agreement.
(b) A certificate signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust, setting forth an amendment
and reciting that it was duly adopted as herein provided, or a copy of this
Declaration or provisions, as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary of the Trust,
shall be conclusive evidence of such amendment.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series or Class may merge into or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange any or
all or substantially all of its Trust Property, including its good will, upon
such terms, conditions and consideration as may be authorized by a majority of
the Trustees.
Section 9.5. Incorporation. The Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all or any part of the
-21-
<PAGE>
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer all or any part
of the Trust Property to any such corporation, trust, partnership, association
or organization in exchange for the shares or securities thereof or otherwise,
and to lend money to, subscribe for the shares or securities of, and enter into
any contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any Series or Class or any successor thereto and any such corporation,
trust, partnership, association or other organization if and to the extent
permitted by law, as provided under the law then in effect. Nothing contained
herein shall be construed as requiring approval of Shareholders for the Trustees
to organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.
ARTICLE X
FINANCIAL REPORTS; BOOKS AND RECORDS
The Trustees shall make required financial reports. Shareholders may
inspect the books and records of the Trust only at the discretion of the
Trustees.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto, or
other document required to be so filed, shall be filed in the office of the
Secretary of The Commonwealth of Massachusetts and in such other places as may
be required under the laws of The Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
such amendment or document so filed shall be accompanied by a certificate signed
and acknowledged by a Trustee or by the Secretary or any Assistant Secretary of
the Trust stating that such action was duly taken in a manner provided herein.
Such amendment or document shall become effective as provided by applicable law.
A restated Declaration, amending and integrating into a single instrument all of
the provisions of this Declaration which are then in effect and operative, may
be executed from time to time by a majority of the Trustees and shall be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 11.2. Resident Agent. To the extent required, the Trustees
shall have power to appoint a resident agent for the Trust in The Commonwealth
of Massachusetts, and from time to time to replace the resident agent so
appointed.
-22-
<PAGE>
Section 11.3. Governing Law. This Declaration is executed by the
Trustees with reference to the laws of The Commonwealth of Massachusetts, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to the laws of said
Commonwealth.
Section 11.4. Counterparts. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (i)
the number or identity of Trustees or Shareholders, (ii) the due authorization
of the execution of any instrument or writing, (iii) the form of any vote passed
at a meeting of Trustees or Shareholders, (iv) the fact that the number of
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (v) the form of any
Bylaws adopted by or the identity of any officers elected by the Trustees, or
(vi) the existence of any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
Section 11.6. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, or any successor statute or with
other applicable laws and regulations, the conflicting provisions shall be
deemed superseded by such law or regulation to the extent required to eliminate
such conflict, if required by law; provided, however, that such determination
shall not affect any of the remaining provisions of this Declaration or render
invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
Section 11.7. Use of the Names "T.O. Richardson" or "Richardson". T.O.
Richardson Company ("Richardson") has consented to the use by the Trust of the
identifying names of "T.O. Richardson" or "Richardson", which are property
rights of Richardson. The Trust will only use the names as a component of its
name and for no other purpose, and will not purport to grant to any third party
the right to use the names "T.O. Richardson" or "Richardson" for any purpose.
Richardson or any corporate affiliate of Richardson may use or grant to others
the right to use the name, as all or a portion of a corporate or business name
or for any commercial purpose, including a
-23-
<PAGE>
grant of such right to any other investment company. At the request of
Richardson, the Trust will take such action as may be required to provide its
consent to the use of the name "T.O. Richardson" or "Richardson" by Richardson,
or any corporate affiliate of Richardson, or by any person to whom Richardson or
an affiliate of Richardson shall have granted the right to the use of the name
"T.O. Richardson" or "Richardson". Upon the termination of any investment
advisory or management agreement or underwriting agreement into which Richardson
or any affiliate of Richardson and the Trust may enter, the Trust shall, upon
request by Richardson, cease to use the name "T.O. Richardson" or "Richardson"
as a component of its name, and shall not use such names or initials as a part
of its name or for any other commercial purpose, and shall cause its officers
and trustees to take any and all actions which Richardson may request to effect
the foregoing and to reconvey to Richardson or such corporate affiliate any and
all rights to such name.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, all as
of the day and year first above written.
/s/Samuel Bailey, Jr.
-------------------------
Samuel Bailey, Jr., as
Trustee and
not individually
T.O. Richardson Company
2 Bridgewater Road
Farmington, Connecticut 06032
-24-
<PAGE>
BYLAWS
OF
T.O. RICHARDSON TRUST
ARTICLE I
Definitions
The terms "Affiliated Person," "Commission," "Declaration,"
"Distributor," "Investment Adviser," "Majority Shareholder Vote," "1940 Act,"
"Series," "Shareholder," "Shareholder Servicing Agent," "Shares," "Trust,"
"Trust Property," and "Trustees" have the respective meanings given them in the
Declaration of Trust of T.O. Richardson Trust dated June 2, 1998, as amended
from time to time.
ARTICLE II
Offices
Section 2.1. Principal Office. The principal office of the Trust in The
Commonwealth of Massachusetts shall be located at the principal place of
business in The Commonwealth of the individual, firm or corporation acting as
the Trust's resident agent in The Commonwealth of Massachusetts.
Section 2.2. Other Offices. In addition to its principal office in The
Commonwealth of Massachusetts, the Trust may have an office or offices at such
other places within or without The Commonwealth of Massachusetts as the Trustees
may from time to time designate or the business of the Trust may require.
ARTICLE III
Shareholders' Meetings
Section 3.1. Time and Place of Meetings. All meetings of Shareholders
shall be held at such time and place, whether within or without The Commonwealth
of Massachusetts, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 3.2. Meetings. Meetings of Shareholders shall be held whenever
a vote of Shareholders is required by the Declaration and at such other times as
the Trustees may determine to be necessary, appropriate or advisable. Meetings
of Shareholders to consider any matter as to which a vote of Shareholders is
required by the 1940 Act or is permitted by Section 15(a)(3), 16(a) or 32(a)(3)
of, or Rule 12b-1(b)(3)(iii) under, the 1940 Act and as to which the Trustees
have not called a meeting of Shareholders shall
<PAGE>
be called by the secretary upon the written request of the holders of Shares
entitled to cast not less than twenty-five percent of all the votes then
entitled to be cast at a meeting of Shareholders without regard to Series. Such
request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. The secretary shall inform such Shareholders of
the estimated reasonable cost of preparing and mailing such notice of the
meeting. Upon payment to the Trust of such costs, the secretary shall give
notice stating the purpose or purposes of the meeting to each Shareholder
entitled to vote at such meeting. Unless requested by the holders of Shares
entitled to cast a majority of all the votes then entitled to be cast at a
meeting of Shareholders without regard to Series, a meeting need not be called
to consider any matter which is substantially the same as a matter voted on at
any meeting of Shareholders held during the preceding twelve months.
Section 3.3. Notice of Meetings. Written notice of each meeting of
Shareholders stating the place, date and hour thereof, and in the case of a
special meeting specifying the purpose or purposes thereof, shall be given to
each Shareholder entitled to vote thereat not less than ten nor more than ninety
days prior to the meeting either by mail or by presenting it to such Shareholder
personally or by leaving it at his or her residence or usual place of business.
If mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, addressed to the Shareholder at his or her post
office address as it appears on the records of the Trust.
Section 3.4. Quorum; Adjournments. Except as otherwise provided by law,
by the Declaration or by these Bylaws, at all meetings of Shareholders the
holders of a majority of the Shares issued and outstanding and entitled to vote
thereat without regard to Series, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business; but this section shall not affect any applicable requirement of law or
the Declaration for the vote necessary for the adoption of any measure. In the
absence of a quorum, the Shareholders present in person or represented by proxy
and entitled to vote thereat shall have power to adjourn the meeting from time
to time without notice other than announcement at the meeting until such quorum
shall be present; and at any meeting at which a quorum shall be present, the
holders of Shares entitled to cast not less than a majority of all the votes
entitled to be cast at such meeting without regard to Series shall have the
power to adjourn the meeting from time to time without notice other than
announcement at such meeting; provided, however, that written notice shall be
given as required by Section 3.3 if such meeting is adjourned to a date more
than one hundred and twenty days after the record date originally scheduled with
respect to the meeting. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted had a
quorum been present at the time originally fixed for the meeting.
Section 3.5. Vote Required. Except as otherwise provided by law, by the
Declaration or by these Bylaws, at each meeting of Shareholders at which a
quorum is present, all matters shall be decided by Majority Shareholder Vote.
Section 3.6. Voting. At any meeting of Shareholders, each Shareholder
having the right to vote shall be entitled to vote in person or by proxy, and
each Shareholder of
-2-
<PAGE>
record shall be entitled to one vote for each Share and to the fractional
portion of one vote for each fractional Share entitled to vote so registered in
his or her name on the records of the Trust on the date fixed as the record date
for the determination of Shareholders entitled to vote at such meeting. If the
Declaration of the 1940 Act requires that Shares be voted by Series, each
Shareholder shall be entitled to vote in person or by proxy, each share or
fraction thereof of such Series standing in his or her name on the register of
the Trust at the time of determining net asset value on such record date.
Section 3.7. Proxies. Each proxy shall be in writing executed by the
Shareholder giving the proxy or by his or her duly authorized attorney. No proxy
shall be valid after the expiration of three years from its date, unless a
longer period is provided for in the proxy.
Section 3.8. Inspectors. The Trustees may, in advance of any meeting of
Shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairperson of the meeting may, and on the
request of any Shareholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his or her
ability.
The inspectors shall determine the number of Shares outstanding and the
voting power of each, the number of Shares represented at the meeting, the
existence of a quorum, the validity and effect of the proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, and determine the result.
On request of the chairman of the meeting or any Shareholder entitled
to vote thereat, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No Trustee or candidate for the office of Trustee shall act as
inspector of an election of Trustees.
Section 3.9. Procedures at Meetings. Except as otherwise provided
herein, at all meetings of Shareholders, all questions relating to the order and
manner in which matters are submitted to a vote, and other matters relating to
questions of procedure shall be decided by the chairman of the meeting, in a
manner consistent with these Bylaws.
Section 3.10. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of Shareholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by each
Shareholder entitled to vote on the matter, and such consents are filed with the
records of the Trust.
-3-
<PAGE>
ARTICLE IV
Trustees
Section 4.1. Annual Meetings of the Trustees. An annual meeting of the
Trustees, commencing with the year 1999, shall be held on such date, not less
than sixty nor more than one hundred and eighty days after the end of the
Trust's last preceding fiscal year, as the Trustees shall prescribe. At each
annual meeting, the Trustees shall elect officers, appoint committees, consider
approving the continuation of any agreement between the Trust and an Investment
Adviser or Distributor and of any distribution and services plan of the Trust
pursuant to Rule 12b-1 under the 1940 Act, take any action which the Trustees
are required to take annually by the 1940 Act, and transact such other business
as may properly come before the meeting.
Section 4.2. Regular and Special Meetings of the Trustees. The Trustees
may in their discretion provide for regular or special meetings of the Trustees.
Regular meetings of the Trustees may be held without further notice at such time
and place as shall be fixed in advance by the Trustees. Special meetings of the
Trustees may be called at any time by the president and shall be called by the
president or the secretary upon the written request of any two Trustees.
Section 4.3. Notice of Special Meetings. Notice of any special meeting
of the Trustees shall be given by written notice delivered personally,
telegraphed, telecopied or mailed to each Trustee at his or her business or
residence address or by telephone. Personally delivered or telegram or
telecopier notices or notice by telephone shall be given at least forty-eight
hours prior to the meeting. Notice by mail shall be given at least five days
prior to the meeting. If mailed, such notice will be deemed to be given when
deposited in the United States mail properly addressed, with postage thereon
prepaid. If notice is given by telegram, such notice shall be deemed to be given
when the telegram is delivered to the telegraph company. If such notice is given
by telecopier such notice shall be given when the telecopy is sent. Neither the
business to be transacted at, nor the purpose of, any special meeting of the
Trustees need be stated in the notice, unless specifically required by the 1940
Act. If all Trustees are present at a meeting, such meeting shall be duly
constituted whether any notice thereof shall have been given.
Section 4.4. Quorum; Adjournments. A majority of the number of Trustees
(but not fewer than two Trustees) shall constitute a quorum for transaction of
business at any meeting of the Trustees; provided, that if less than a majority
of such number of Trustees is present at any such meeting, a majority of the
Trustees present or the sole Trustee present may adjourn the meeting from time
to time without further notice until a quorum is present.
Section 4.5. Voting. The action of a majority of the Trustees present
at a meeting at which a quorum is present shall be the action of the Trustees,
unless the concurrence of a greater proportion or of any specified group of
Trustees is required for such action by law, the Declaration or these Bylaws.
-4-
<PAGE>
Section 4.6. Executive and Other Committees. The Trustees may designate
one or more committees, each committee to consist of two or more Trustees and to
have such title as the Trustees may consider to be properly descriptive of its
function, except that not more than one committee shall be designated as the
Executive Committee. Each such committee shall serve at the pleasure of the
Trustees.
In the absence of any member of such committee, the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint a
Trustee to act in the place of such absent member.
The Trustees may delegate to any of the committees appointed under this
Section 4.6 any of the powers of the Trustees, except the power to: (a) amend
the Declaration; (b) authorize the merger or consolidation of the Trust or the
sale, lease or exchange of all or substantially all of the Trust Property; (c)
approve the incorporation of the Trust; (d) approve the termination of the
Trust; (e) declare dividends or distributions on Shares; (f) issue Shares except
pursuant to a general formula or method specified by the Trustees by resolution;
(g) amend these Bylaws; or (h) elect or appoint or remove Trustees.
Each committee shall keep minutes or other appropriate written evidence
of its meetings or proceedings and shall report the same to the Trustees as and
when requested by the Trustees, and shall observe such other procedures with
respect to its meetings as may be prescribed by the Trustees in the resolution
appointing such committee, or, if and to the extent not so prescribed, as are
prescribed in these Bylaws with respect to meetings of the Trustees.
Section 4.7. Participation in Meetings by Telephone. Any Trustee may
participate in a meeting of the Trustees or of any committee of the Trustees by
means of conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Except as
required by the 1940 Act, participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 4.8. Informal Action by Trustees. Any action required or
permitted to be taken at any meeting of the Trustees or of any committee of the
Trustees may be taken without a meeting, if a consent in writing to such action
is signed by each Trustee in the case of a meeting of Trustees, or each Trustee
who is a member of the committee, in the case of a meeting of a committee, and
such written consent is filed with the minutes of proceedings of the Trustees or
of the committee.
Section 4.9. Compensation. The Trustees shall determine and from time
to time fix by resolution the compensation payable to Trustees for their
services to the Trust in that capacity. Such compensation may consist of a fixed
annual fee or a fixed fee for attendance at meetings of the Trustees or of any
committee of the Trustees of which the Trustees receiving such fees are members,
or a combination of a fixed annual fee and a fixed fee for attendance. In
addition, the Trustees may authorize the reimbursement of Trustees for their
expenses for attendance at meetings of the Trustees or of any
-5-
<PAGE>
committee of the Trustees of which they are members. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any other
capacity and receiving compensation therefor.
ARTICLE V
Waiver of Notice
Whenever any notice is required to be given pursuant to law, the
Declaration or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to such notice, or, in the case of any waiver of notice of
any meeting of Shareholders, signed by the proxy for a Shareholder entitled to
notice thereof, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at nor the purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by law, the Declaration or these Bylaws. The
attendance of any person at any meeting in person, or, in the case of a meeting
of Shareholders, by proxy, shall constitute a waiver of notice of such meeting,
except where such person attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
ARTICLE VI
Officers
Section 6.1. Executive Officers. The executive officers of the Trust
shall be a president, a treasurer, and a secretary, and one or more
vice-presidents. If the Trustees shall elect a chairperson pursuant to Section
6.7, then the chairperson shall also be an executive officer of the Trust. If
the Trustees shall elect one or more vice-presidents, each such vice-president
shall be an executive officer. The chairperson, if there is one, shall be
elected from among the Trustees, but no other executive officer need be a
Trustee. Any two or more executive offices, except those of president and
vice-president, may be held by the same person. A person holding more than one
office may not act in more than one capacity to execute, acknowledge or verify
on behalf of the Trust an instrument required by law to be executed,
acknowledged or verified by more than one officer. The executive officers of the
Trust shall be elected at each annual meeting of Trustees.
Section 6.2. Other Officers and Agents. The Trustees may also elect or
may delegate to the president authority to appoint, remove or fix the duties,
compensation or terms of office of one or more assistant vice-presidents,
assistant treasurers and assistant secretaries, and such other officers and
agents as the Trustees shall at any time and from time to time deem to be
advisable.
-6-
<PAGE>
Section 6.3. Tenure, Resignation and Removal. Each officer of the Trust
shall hold office until his or her successor is elected or appointed or until
his or her earlier displacement from office by resignation, removal or
otherwise; provided, that if the term of office of any officer elected or
appointed pursuant to Section 6.2 shall have been fixed by the Trustees or by
the president acting under authority delegated by the Trustees, such officer
shall cease to hold such office no later than the date of expiration of such
term, regardless of whether any other person shall have been elected or
appointed to succeed him or her. Any officer of the Trust may resign at any time
by written notice to the Trust. Any officer or agent of the Trust may be removed
at any time by the Trustees or by the president acting under authority delegated
by the Trustees pursuant to Section 6.2 if in their or his or her judgment the
best interests of the Trust would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights between the Trust and such officer or agent.
Section 6.4. Vacancies. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Trustees or by the president acting
under authority delegated by the Trustees pursuant to Section 6.2. Each officer
elected or appointed to fill a vacancy shall hold office for the balance of the
term for which his or her predecessor was elected or appointed.
Section 6.5. Compensation. The compensation, if any, of all officers of the
Trust shall be fixed by the Trustees or by the president acting under authority
delegated by the Trustees pursuant to Section 6.2.
Section 6.6. Authority and Duties. All officers as between themselves
and the Trust shall have such powers, perform such duties and be subject to such
restrictions, if any, in the management of the Trust as may be provided in these
Bylaws, or, to the extent not so provided, as may be prescribed by the Trustees
or by the president acting under authority delegated by the Trustees pursuant to
Section 6.2.
Section 6.7. Chairperson. When and if the Trustees deem such action to
be necessary or appropriate, they may elect a chairperson from among the
Trustees. The chairperson of the Trust shall preside at meetings of the
Shareholders and of the Trustees; and he or she shall have such other powers and
duties as may be prescribed by the Trustees. The chairperson shall in the
absence or disability of the president exercise the powers and perform the
duties of the president.
Section 6.8. President. The president of the Trust shall have general
and active management of the business of the Trust, shall see to it that all
orders, policies and resolutions of the Trustees are carried into effect, and,
in connection therewith, shall be authorized to delegate to any vice-president
of the Trust such of his or her powers and duties as president and at such times
and in such manner as he or she shall deem advisable. In the absence or
disability of the chairperson, or if there is no chairperson, the president
shall preside at all meetings of the Shareholders and of the Trustees; and he
shall have such other powers and perform such other duties as are incident to
the office of a chief executive officer and as the Trustees may from time to
time prescribe.
-7-
<PAGE>
Section 6.9. Vice-Presidents. The vice-president, if any, or, if there
is more than one, then the vice-presidents of the Trust, shall assist the
president in the management of the business of the Trust and the implementation
of orders, policies and resolutions of the Trustees at such times and in such
manner as the president may deem to be advisable. If there is more than one
vice-president, the Trustees may designate one as the executive vice-president,
in which case he or she shall be first in order of seniority, and the Trustees
may also grant to other vice-presidents such titles as shall be descriptive of
their respective functions or indicative of their relative seniority. In the
absence or disability of both the president and the chairperson, or in the
absence or disability of the president if there is no chairman, the
vice-president, or, if there is more than one, the vice-presidents in the order
of their relative seniority, shall exercise the powers and perform the duties of
those officers; and the vice-president or vice-presidents shall have such other
powers and perform such other duties as from time to time may be prescribed by
the president or by the Trustees.
Section 6.10. Assistant Vice-Presidents. The assistant vice-president,
if any, or if there is more than one, the assistant vice-presidents of the
Trust, shall perform such duties as may from time to time be prescribed by the
Trustees or by the president acting under authority delegated by the Trustees
pursuant to Section 6.2.
Section 6.11. Secretary. The secretary of the Trust shall (a) keep the
minutes of the meetings and proceedings and any written consents evidencing
actions of the Shareholders, the Trustees and any committees of the Trustees in
one or more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these Bylaws or as required by law;
(c) be custodian of the business records and of the seal of the Trust, and, when
authorized by the Trustees, cause the seal of the Trust to be affixed to any
document requiring it, and when so affixed attested by his or her signature as
secretary or by the signature of an assistant secretary; and (d) in general,
perform such other duties as from time to time may be assigned to him or her by
the president or by the Trustees.
Section 6.12. Assistant Secretaries. The assistant secretary, if any,
or, if there is more than one, the assistant secretaries of the Trust in the
order determined by the Trustees or by the president, shall in the absence or
disability of the secretary exercise the powers and perform the duties of the
secretary, and he or she or they shall perform such other duties as the
Trustees, the president or the secretary may from time to time prescribe.
Section 6.13. Treasurer. The treasurer of the Trust shall keep full and
accurate accounts of receipts and disbursements in books belonging to the Trust,
shall deposit all moneys and other valuable effects in the name and to the
credit of the Trust in such depositories as may be designated by the Trustees,
and shall render to the Trustees and the president, at regular meetings of the
Trustees or whenever they or the president may require it, an account of all his
or her transactions as treasurer and of the financial condition of the Trust.
-8-
<PAGE>
If required by the Trustees, the treasurer shall give the Trust a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his or her office and for
the restoration to the Trust, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind belonging to the Trust in his or her possession or under his or
her control.
Section 6.14. Assistant Treasurers. The assistant treasurer, if any,
or, if there is more than one, the assistant treasurers in the order determined
by the Trustees or by the president, shall in the absence or disability of the
treasurer exercise the powers and perform the duties of the treasurer, and he or
she or they shall perform such other duties as the Trustees, the president or
the treasurer may from time to time prescribe.
ARTICLE VII
Contracts, Checks and Drafts
Section 7.1. Contracts. The Trustees may authorize any officer or agent
to enter into any contract or to execute and deliver any instrument in the name
and on behalf of the Trust, and such authority may be general or confined to
specific instances. All contracts entered into on behalf of the Trust shall
comply with Section 5.6 of the Declaration.
Section 7.2. Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or officers or agent or agents
of the Trust and in such manner as shall from time to time be determined by the
Trustees.
ARTICLE VIII
Shares of Beneficial Interest
Section 8.1. Certificates of Shares. For any Series of Shares for which
the Trustees shall issue Share certificates each Shareholder of such Series
shall be entitled, upon written request made to the Trust or the Shareholder
Servicing Agent, to a certificate or certificates which shall represent and
certify the number of Shares held by him in the Trust. Each certificate shall be
signed by the chairperson, if there is one, the president or a vice-president
and countersigned by the secretary or an assistant secretary or the treasurer or
an assistant treasurer and may be sealed with the seal of the Trust. The
signatures and seal, if any, on a certificate may be either manual or facsimile.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. A full record of the issuance of each
certificate and the identifying number assigned thereto shall be made on the
books and records of the Trust usually kept for the purpose or required by
statute.
-9-
<PAGE>
Section 8.2. Transfers of Shares. Upon surrender to the Trust or the
Shareholder Servicing Agent of a certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the Trust
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. Shares of the Trust not
represented by certificate shall be transferred by recording the transaction on
the books of the Trust maintained by the Shareholder Servicing Agent upon
presentation of proper evidence of succession, assignment or authority to
transfer.
The Trust shall be entitled to treat the holder of record of any Share
or Shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such Share or Shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.
Section 8.3. Lost Certificates. The Trustees may by resolution
establish procedures pursuant to which a new certificate may be issued in place
of any certificate theretofore issued by the Trust which has been mutilated or
which is alleged to have been lost, stolen or destroyed, upon presentation of
each such mutilated certificate, or the making by the person claiming any such
certificate to have been lost, stolen or destroyed of an affidavit as to the
fact and circumstances of the loss, theft or destruction thereof. The Trustees,
in their discretion and as a condition precedent to the issuance of any new
certificate, may include among such procedures a requirement that the owner of
any certificate alleged to have been lost, stolen or destroyed, or his legal
representative, furnish the Trust with a bond, in such sum and with such surety
or sureties as they may direct, as indemnity against any claim that may be made
against the Trust in respect of such lost, stolen or destroyed certificate.
Section 8.4. Fixing of Record Date. For the purpose of determining the
Shareholders entitled to notice of, or to vote at, any meeting of Shareholders
or at any adjournment thereof in respect of which a new record date is not
fixed, or to express written consent to or dissent from the taking of action by
Shareholders without a meeting, or for the purpose of determining the
Shareholders entitled to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of Shares, or for the purpose of any other lawful action,
the Trustees may fix, in advance, a date as the record date for any such
determination of Shareholders. Such date shall not be more than ninety days, and
in case of a meeting of Shareholders not less than ten days, before the date on
which the meeting or particular action requiring such determination of
Shareholders is to be held or taken. If no record date is fixed, (a) the record
date for the determination of Shareholders entitled to notice of or to vote at a
meeting of Shareholders shall be the later of: (i) the close of business on the
day on which the notice of meeting is first mailed to any Shareholder; or (ii)
the thirtieth day before the meeting; (b) the record date for determining the
Shareholders entitled to express written consent to the taking of any action
without a meeting, when no prior action by the Trustees is necessary, shall be
the day on which the first written consent is expressed; and (c) the record date
for the determination of Shareholders entitled to receive payment of a dividend
or other
-10-
<PAGE>
distribution or an allotment of any other rights shall be at the close of
business on the day on which the resolution of the Trustees declaring the
dividend, distribution or allotment of rights is adopted.
ARTICLE IX
Fiscal Year
The fiscal year of the Trust shall be fixed and may from time to time
be changed by resolution of the Trustees; provided, that if a different fiscal
year shall not have been fixed by the Trustees on or before December 31, 1998,
the first fiscal year of the Trust shall end on December 31, 1998 and
thereafter, unless the Trustees shall fix a different fiscal year, it shall be
the period of twelve consecutive calendar months ending on the thirtieth day of
April in each year.
ARTICLE X
Seal
The Trustees may adopt a seal, which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time provide. The
seal of the Trust may be affixed to any document, and the seal and its
attestation may be lithographed, engraved or otherwise printed on any document.
ARTICLE XI
Indemnification and Insurance
Section 11.1. The Trust shall indemnify any person who is a present or
former Trustee or officer of the Trust and who, by reason of his or her position
as such, was, is or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than any action or suit by or in the right of the Trust)
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him in connection with the
claim, action, suit or proceeding, if he or she acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon the plea of nolo contendere or its equivalent shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal
-11-
<PAGE>
action or proceeding, had reasonable cause to believe that his or her conduct
was unlawful.
Section 11.2. The Trust shall indemnify any person who is a present or
former Trustee or officer of the Trust and who, by reason of his or her position
as such, was, is or is threatened to be made a party to any threatened, pending
or completed action or suit by or on behalf of the Trust to obtain a judgment or
decree in its favor against expenses, including attorneys' fees, actually and
reasonably incurred by him or her in connection with the defense or settlement
of the action or suit, if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Trust; provided, that no indemnification shall be made in respect of any claim,
issue or matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the Trust,
except to the extent that the court in which the action or suit was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for those expenses which the court shall deem proper, and
such person is not adjudged to be liable by reason of his or her willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Section 11.3. To the extent that a Trustee or officer of the Trust has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.1 or 11.2, or in defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him or her in
connection therewith.
Section 11.4. Unless a court orders otherwise, any indemnification
under Section 11.1 or 11.2 may be made by the Trust only as authorized in the
specific case after a determination that indemnification of the person to be
indemnified is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Sections 11.1 or 11.2. The
determination shall be made by: (a) the Trustees, by a majority vote of a quorum
consisting of Trustees who were not parties to the action, suit or proceeding;
or (b) if the required quorum is not obtainable or if a quorum of disinterested
Trustees so directs, an independent legal counsel in a written opinion.
Nothing contained in this Article XI shall be construed to protect any
person against any liability to the Trust or its Shareholders to which he or she
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 (any such conduct being hereinafter referred to as "Disabling
Conduct"). No indemnification shall be made pursuant to this Article XI unless:
(a) there is a final determination on the merits by a court or other
body before whom the action, suit or proceeding was brought that the person to
be indemnified was not liable by reason of Disabling Conduct; or
-12-
<PAGE>
(b) in the absence of such a judicial determination, there is a reasonable
determination, based upon a review of the facts, that such person was not liable
by reason of Disabling Conduct, which determination shall be made by:
(i) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the 1940 Act, nor parties to the action, suit or proceeding; or
(ii) an independent legal counsel in a written opinion.
Section 11.5. Notwithstanding any provision of this Article XI, any
advance payment of expenses by the Trust to any person to be indemnified
hereunder shall be made only upon the undertaking by or on behalf of such person
to repay the advance unless it is ultimately determined that he or she is
entitled to indemnification as above provided, and only if one of the following
conditions is met:
(a) the person to be indemnified provides a security for his or her
undertaking; or
(b) the Trust is insured against losses arising by reason of any lawful
advances; or
(c) there is a determination, based on a review of readily- available
facts, that there is no reason to believe that the person to be indemnified
ultimately will be entitled to indemnification, which determination shall be
made by:
(i) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the 1940 Act, nor parties to the action, suit or proceeding; or
(ii) an independent legal counsel in a written opinion.
Section 11.6. The indemnification provided by this Article XI shall
continue as to a person who has ceased to be a Trustee or officer of the Trust
and inure to the benefit of the legal representatives of such person and shall
not be deemed exclusive of any other rights to which such person may be entitled
under any agreement, vote of Trustees or otherwise, both as to action in his or
her official capacity and as to action in another capacity while holding office;
provided, that no person may satisfy any right of indemnity granted herein or to
which he or she may be otherwise entitled, except out of the Trust Property, and
no Shareholder shall be personally liable with respect to any claim for
indemnity.
Section 11.7. The Trust may purchase and maintain insurance on behalf
of any person who is or was a Trustee, officer, employee or agent of the Trust,
against any or her liability asserted against him and incurred by him or her in
any such capacity, or arising out of his or her status as such. However, the
Trust shall not purchase insurance to indemnify any Trustee or officer against
liability for any conduct in respect of which the 1940 Act prohibits the Trust
itself from indemnifying or her.
-13-
<PAGE>
ARTICLE XII
Net Asset Value
The Trustees shall by resolution prescribe the manner, frequency and
time of day for determining the net asset value per Share of each Series of the
outstanding Shares of the Trust.
ARTICLE XIII
Federal Supremacy
If at a time when the Trust is registered as an investment company
under the 1940 Act, any of the foregoing provisions of these Bylaws or of the
Declaration or the law of The Commonwealth of Massachusetts relating to business
trusts shall conflict or be inconsistent with any applicable provision of the
1940 Act, the applicable provision of the 1940 Act shall be controlling and the
Trust shall not take any action which is in conflict or inconsistent therewith.
ARTICLE XIV
Amendments
These Bylaws may be amended, altered or repealed, or new Bylaws may be
adopted by the Trustees. The Trustees shall in no event adopt Bylaws which are
in conflict with the Declaration and, subject to Article XIII of these Bylaws,
any apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XV
Declaration of Trust
The Declaration of Trust establishing the Trust, dated June 2, 1998, a
copy of which, together with all amendments thereto, is on file in the office of
the Secretary of State of The Commonwealth of Massachusetts, provides that the
name "T.O. Richardson Trust" refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
Shareholder, officer, employee or agent of the Trust shall be held personally
liable, nor shall resort be had to their private property for the satisfaction
of any obligation or claim or otherwise, in connection with the affairs of the
Trust, but the Trust Property only shall be liable.
-14-
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this _____ day of ________1998, by and between T. O.
Richardson Trust, a Massachusetts business trust (the "Trust") created pursuant
to that certain Declaration of Trust of T.O. Richardson Trust dated June 2,
1998, as amended from time to time (the "Declaration"), and T.O. Richardson
Company, Inc., a Connecticut corporation (the "Advisor").
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act") consisting of an unlimited number of series or shares representing
beneficial interests in one of the separate series or classes of shares of the
Trust which are established and designated from time to time in accordance with
the Declaration (each a "Series" or "Class") and, each having its own
fundamental investment policies and restrictions;
WHEREAS, the "T.O. Richardson Sector Rotation Fund" (the "Fund") is one of
the Series of Shares established and designated under the Declaration;
WHEREAS, the Trust has retained Firstar Trust Company, a Wisconsin
corporation, (the "Administrator") to provide administration of the Trust's
operations in respect of the Fund, subject to the control of the Board of
Trustees of the Fund; and
WHEREAS, the Trust desires to retain the Advisor to render investment
management services with respect to the Fund and the Advisor is willing to
render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. Definitions. All capitalized terms used and not otherwise defined
shall have the meanings given such terms in the Declaration.
2. Investment Advisory Services. The Trust hereby engages the Advisor, on
the terms and conditions hereafter set forth to provide the investment
advisory and investment management services (collectively called
"Investment Advisor Services") to manage the investment and
reinvestment of the assets, and to continuously review, supervise, and
administer the investment program of the Fund to determine in its
discretion the securities to be purchased or sold to provide the
Administrator and the Trust with copies of such records concerning the
Advisor's activities which the Trust shall request and that it is
required to maintain, provided that the Trust gives reasonable advance
notice of its request for such copies, and to render regular reports
to the Administrator and to the Trust's Officers and Trustees
concerning the Advisor's discharge of the foregoing responsibilities.
<PAGE>
The Advisor shall provide the foregoing investment advisory
services subject to the control of the Board of Trustees of
the Trust and in compliance with such policies as the Trustees
may from time to time establish, and in compliance with the
objectives, policies, and limitations for the Fund set forth
in the Fund's Prospectus and Statement of Additional
Information, in each case as amended from time to time, and
applicable laws and regulations.
The Advisor accepts such engagement and agrees, at its own
expense, to render the Investment Advisory Services required
hereunder and to provide the office space, furnishings and
equipment and the personnel required by it to perform such
services on the terms and for the compensation provided
herein.
3. Portfolio Transactions. The Advisor is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Fund and is directed to use its best
efforts to obtain the best net results as described from time to time
in the Fund's Prospectuses and Statement of Additional Information.
The Advisor will promptly communicate to the Administrator and to the
officers and the Trustees of the Trust such information relating to
the portfolio transactions as they may reasonably request.
It is understood that the Advisor will not be deemed to have
acted unlawfully, or to have breached a fiduciary duty to the
Trust or be in breach of any obligation owing to the Trust
under this Agreement, or otherwise, by reason of its having
directed a securities transaction on behalf of the Trust to a
broker-dealer in compliance with the provisions of Section
28(e) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or as described from time to time by the
Fund's Prospectuses and Statement of Additional Information.
4. Compensation of the Advisor. For the Investment Advisory Services and
the related services to be rendered by the Advisor as provided in
Sections 2 and 3 of this Agreement, the Trust shall pay to the Advisor
compensation at the rate specified in the Schedule(s) which are
attached hereto and made a part of this Agreement. Such compensation
shall be paid to the Advisor at the end of each month, and calculated
by applying a daily rate, based on the annual percentage rates as
specified in the attached Schedule(s), to the assets of the Fund. The
fee shall be based on the average daily net assets of the Fund for the
month involved.
If at any time this Agreement is terminated, any fees or
compensation for services performed shall be pro rated to the
effective date of termination, and such pro rated fees or
compensation shall be paid to the Advisor promptly upon
receipt of an invoice therefor. All rights of compensation
<PAGE>
under this Agreement for services performed shall survive the
termination of this Agreement.
5. Excess Expenses. If the expenses for the Fund for any fiscal
year (including fees and other amounts payable to the Advisor,
but excluding interest, taxes, brokerage costs, litigation,
and other extraordinary costs) as calculated every business
day would exceed the expense limitations imposed on investment
companies by any applicable statute or regulatory authority of
any jurisdiction in which shares of the Fund are qualified for
offer and sale, the Advisor shall bear such excess cost.
However, the Advisor will not bear expenses of the Fund which
would result in the Fund's inability to qualify as a regulated
investment company under provisions of the Internal Revenue
Code of 1986, as amended. Payment of expenses by the Advisor
pursuant to this Section 5 shall be settled on a monthly basis
(subject to fiscal year end reconciliation) by a reduction in
the fee payable to the Advisor for such month pursuant to
Section 4, and, if such reduction shall be insufficient to
offset such expenses, by reimbursing the Trust.
6. Reports. The Trust and the Advisor agree to furnish to each
other, if applicable, current prospectuses, proxy statements
and reports to shareholders in respect of the Fund, certified
copies of their financial statements, and such other
information with regard to their affairs as each may
reasonably request.
7. Status of the Advisor. (a) Advisor's performance of its services
required to be performed by it hereunder shall be performed as Advisor
to the Trust in respect of the Fund. Nothing in this Agreement shall
be construed as creating an agency relationship between the Trust or
the Fund and the Advisor with respect to any services or activities
whether or not expressly provided for in this Agreement. Nothing in
this Agreement shall be construed as creating a partnership, joint
venture, co-venture, joint undertaking or employment arrangement by or
between the Trust and Advisor. (b) It is understood that Advisor
performs or may perform investment advisory, investment management or
consulting services for accounts and/or clients other than the Trust.
The Trust acknowledges that Advisor may provide investment advice or
consulting services to any of its other accounts and/or clients that
may differ from advice given to the Trust, or take action with respect
to any of its other clients accounts and/or that may differ from the
nature of action recommended with respect to the Trust. It is
understood that Advisor shall have no obligation to purchase or sell,
or to recommend for purchase or sale for the Trust, any security which
Advisor, its principals, affiliates, employees or agents may purchase
or sell for its own or their own accounts or for the account of any
other client, if, in the opinion of Advisor, such transaction or
investment appears
<PAGE>
unsuitable, impractical or undesirable for the Trust or does
not comply with the terms and provisions of the Fund's
Prospectus and Statement of Additional Information.
8. Certain Records. Any records required to be maintained and
preserved pursuant to the provisions of Rule 31a-1 and Rule
31a-2 promulgated under the 1940 Act which are prepared or
maintained by the Advisor on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the
Trust on request.
9. Limitation of Liability and Indemnification of the Advisor. The
duties of the Advisor shall be confined to those expressly set
forth herein, and no implied duties are assumed by or may be
asserted against the Advisor hereunder. The Advisor shall not be
liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in
carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of
its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable state law or Federal
securities law which cannot be waived or modified hereby. (As
used in this Paragraph 9, the term "Advisor" shall include
directors, officers, employees and other corporate agents of the
Advisor as well as that corporation itself).
The Trust shall indemnify the Advisor (as such term is defined
for purposes of this paragraph 9) and hold it harmless from
and against any and all actions, suites and claims, whether
groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including
reasonable investigation expenses) arising directly or
indirectly out of the services rendered to the Trust hereunder
except to the extent that losses, damages, costs, charges,
fees, disbursements, payments, expenses or liabilities are
found by a court of competent jurisdiction in a judgment which
has become final in that it is no longer subject to appeal or
review to have resulted primarily from the Advisor's willful
misfeasance, bad faith or gross negligence in the performance
of its duties hereunder, or by reason of reckless disregard of
its obligations and duties hereunder, except as may otherwise
be provided under provisions of applicable state law or
federal securities laws which cannot be waived or modified
hereby. The indemnity and defense provisions set forth in this
Section 9 shall indefinitely survive the termination of this
Agreement.
The rights hereunder shall include the right to reasonable
advances or defense expenses in the event of any pending or
threatened litigation with respect to which indemnification
hereunder may ultimately be merited. In order that the
indemnification provision contained herein shall apply
<PAGE>
however, it is understood that if in any case the Trust may be
asked to indemnify or hold the Advisor 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 Advisor will use all reasonable care to
identify and notify the Trust promptly concerning any
situation which presents or appears likely to present
probability of such a claim or indemnification against the
Trust, but failure to do so in good faith shall not affect the
rights hereunder.
The Advisor may apply to the Trust at any time for
instructions and may consult counsel for the Trust or its own
counsel and with accountants and other experts with respect to
any matter arising in connection with the Advisor's duties,
and the Advisor shall not be liable or accountable for any
action taken or omitted by it in good faith in accordance with
such instruction or with the opinion of such counsel,
accountants or other experts.
10. Permissible Interests. Trustees, agents, and shareholders of the
Trust are or may be interested in the Advisor (or any successor
thereof) as directors, partners, officers, or shareholders, or
otherwise; directors, partners, officers, agents, and
shareholders of the Advisor are or may be interested in the Trust
as Trustees, shareholders or otherwise; and the Advisor (or any
successor) is or may be interested in the Trust as a shareholder
or otherwise. In addition, broker transactions for the Trust may
be effected through affiliates of the Advisor if approved by the
Board of Trustees, subject to applicable provisions of the 1940
Act, the Exchange Act and the rules and regulations promulgated
thereunder
11. License of the Advisor's Name. The Advisor hereby agrees to
grant a non-exclusive license to the Trust for use of its name
in the name of the Fund for the term of this Agreement and
such license shall terminate upon termination of this
Agreement.
12. Duration and Termination. This Agreement, unless sooner
terminated as provided herein, shall remain in effect until two
years from date of execution, and thereafter, for periods of one
year so long as such continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust or by Majority Shareholder Vote; provided
however, that if the Shareholders of the Fund fail to approve the
Agreement as provided herein, the Advisor may continue to serve
hereunder in the manner and to the extent permitted by the 1940
Act and rules and regulations thereunder. The foregoing
requirement that continuance of this Agreement be "specifically
approved at least annually" shall be
<PAGE>
construed in a manner consistent with the 1940 Act and the
rules and regulations promulgated thereunder.
This Agreement may be terminated as to the Fund at any time,
without the payment of any penalty by vote of a majority of
the Trustees of the Trust or by Majority Shareholder Vote on
not less than 30 days nor more than 60 days written notice to
the Advisor, or by the Advisor at any time without the payment
of any penalty, on 90 days written notice to the Trust. This
Agreement will automatically and immediately terminate in the
event of its assignment.
As used in this Section 12, the terms "assignment",
"interested persons", and a "vote of a majority of the
outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules and
regulations promulgated thereunder, subject to such exemptions
as may be granted from time to time by the Securities and
Exchange Commission under said Act.
13. Change in the Advisor's Owners and Executive Officers. The
Advisor agrees that it shall notify the Trust of any change in
the owners and executive officers of the Advisor within a
reasonable time after such change.
14. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if (i) delivered by
overnight delivery by a nationally recognized carrier service
(ii) sent by telefax or (iii) sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to
the other party at the last address furnished by the other party
to the party giving notice: if to the Trust, or the Advisor, at
Two Bridgewater Road, Farmington, Connecticut 06032, Telefax
(860) 678-8793. Any notice shall be deemed given when received if
sent by Telefax or by courier server or _____days after mailing,
if mailed.
15. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be
affected thereby.
16. Governing Law. This Agreement shall be governed by the
internal laws of the Commonwealth of Massachusetts, without
regard to conflict of law principles; provided, however, that
nothing herein shall be construed as being inconsistent with
the 1940 Act.
A copy of the Declaration 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 is not binding upon any of
the Trustees, officers, or shareholders of the Trust individually but binding
only upon the assets and
<PAGE>
property of the Trust.
The Fund shall not be liable for the obligations of any other Series or Class of
the Trust. Without limiting the generality of the foregoing, the Advisor shall
look only to the assets of the Fund for payment of fees for services rendered to
the Fund.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
T.O. RICHARDSON TRUST
By:________________________________
Attest:______________________________
T.O. RICHARDSON COMPANY, INC.
By:________________________________
Attest:______________________________
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of_______ __, 1998, between T.O. Richardson Trust
(the "Trust"), a Massachusetts Business Trust and T.O. Richardson Securities,
Inc. ("TORS"), a corporation organized and existing under the laws of the State
of Connecticut.
WHEREAS the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company,
and has registered one or more distinct series of shares of beneficial interest
("Shares") for sale to the public under the Securities Act of 1933, as amended
(the "1933 Act"), and has qualified its shares for sale to the public under
various state securities laws, and
WHEREAS the Trust desires to retain TORS as principal underwriter in
connection with the offering and sale of the Shares of each series listed on
Schedule A (as amended from time to time) to this Agreement; and
WHEREAS this Agreement has been approved by a vote of the Trust's Board
of Trustees (the "Board") and its disinterested trustees in conformity with
Section 15(c) under the 1940 Act; and
WHEREAS TORS is willing to act as principal underwriter for the Trust on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints as its agent to be the
principal underwriter so as to hold itself out as available to receive and
accept orders for the purchase and redemption of the Shares on behalf of the
Trust, subject to the terms and for the period set forth in this Agreement. TORS
hereby accepts such appointment and agrees to act hereunder. The Trust
understands that any solicitation activities conducted on behalf of the Trust
will be conducted primarily, if not exclusively, by employees of the Trust's
sponsor who shall become registered representatives or by registered
representatives of other NASD member firms which have entered into a selling
agreement with TORS.
2. Services and Duties (a) TORS agrees to sell Shares on a best efforts
basis from time to time during the term of this Agreement as agent for the Trust
and upon the terms described in the Registration Statement. As used in this
Agreement, the term "Registration Statement" shall mean the currently effective
registration statement of the Trust, and any supplements thereto, under the 1933
Act and the 1940 Act.
(b) TORS will hold itself available to receive purchase and redemption
orders satisfactory to the Trust for Shares and will accept such orders on
behalf of the Trust. Such purchase orders shall be deemed effective at the time
and in the manner set forth in the Registration Statement.
<PAGE>
(c) TORS, with the operational assistance of the Trust's transfer
agent, shall make Shares available through the National Securities Clearing
Corporation's Fund/SERV System.
(d) TORS shall provide to investors and potential investors only such
information regarding the Trust as the Trust shall provide or approve. TORS
shall review and file all proposed advertisements and sales literature with
appropriate regulators and consult with the Trust regarding any comments
provided by regulators with respect to such materials.
(e) The offering price of the Shares shall be the price determined in
accordance with, and in the manner set forth in, the most current Prospectus.
The Trust shall make available to TORS a statement of each computation of net
asset value and the details of entering into such computation.
(f) TORS at its sole discretion may repurchase Shares offered for sale
by the shareholders. Repurchase of Shares by TORS shall be at the price
determined in accordance with, and in the manner set forth in, the most current
Prospectus. At the end of each business day, TORS shall notify, by any
appropriate means, the Trust and its transfer agent of the orders for repurchase
of Shares received by TORS since the last such report, the amount to be paid for
such Shares, and the identity of the shareholders offering Shares for
repurchase. The Trust reserves the right to suspend such repurchase right upon
written notice to TORS and TORS further agrees to act as agent for the Trust to
receive and transmit promptly to the Trust's transfer agent shareholder requests
for redemption of Shares.
(g) TORS shall not be obligated to sell any certain number of Shares.
(h) TORS shall prepare reports for the Board regarding its activities
under this Agreement as from time to time shall be reasonably requested by the
Board.
3. Duties of the Trust. The Trust shall keep TORS fully informed of its
affairs and shall provide to TORS from time to time copies of all information,
financial statements, and other papers that TORS may reasonably request for use
in connection with the distribution of Shares, including, without limitation,
certified copies of any financial statements prepared for the Trust by its
independent public accountant and such reasonable number of copies of the most
current Prospectus, Statement of Additional Information ("SAI"), and annual and
interim reports as may request, and the Trust shall fully cooperate in the
efforts of TORS to sell and arrange for the sale of Shares.
(b) The Trust shall maintain a currently effective Registration
Statement on Form N-1A with the Securities and Exchange Commission (the "SEC"),
maintain qualification with applicable states and file such reports and other
documents as may be required under applicable federal and state laws. The Trust
shall notify TORS in writing of the states in which the Shares may be sold and
shall notify TORS in writing of any changes
<PAGE>
to such information. The Trust shall bear all expenses related to preparing and
typesetting such Prospectuses, SAI and other materials required by law and such
other expenses, including printing and mailing expenses, related to the Trust's
communication with persons who are shareholders.
(c) The Trust shall not use any advertisements or other sales materials
that have not been (i) submitted to for its review and approval, and (ii) filed
with the appropriate regulators.
(d) The Trust represents and warrants that its Registration Statement
and any advertisements and sales literature (excluding statements relating to
TORS and the services it provides that are based upon written information
furnished by TORS expressly for inclusion therein) of the Trust shall not
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that all statements or information furnished to TORS pursuant to
Section 3(a) hereof, shall be true and correct in all material respects.
4. Other Broker-Dealers. TORS in its discretion may enter into
agreements to sell Shares to such registered and qualified retail dealers, as
reasonably requested by the Trust. The form of any such dealer agreement shall
be mutually agreed upon and approved by the Trust and TORS.
5. Withdrawal of Offering . The Trust reserves the right at any time to
withdraw all offerings of any or all Shares by written notice to TORS at its
principal office. No Shares shall be offered by TORS or the Trust under any
provisions of this Agreement and no orders for the purchase or sale of Shares
hereunder shall be accepted by the Trust if and so long as effectiveness of the
Registration Statement then in effect or any necessary amendments thereto shall
be suspended under any of the provisions of the 1933 Act, or if and so long as a
current prospectus as required by Section 5(b)(2) of the 1933 Act is not on file
with the SEC.
6. Services Not Exclusive. The services furnished by TORS hereunder are
not to be deemed exclusive and TORS shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
7. Expenses of the Trust. The Trust shall bear all costs and expenses
of registering the Shares with the SEC and state and other regulatory bodies,
and shall assume expenses related to communications with shareholders of the
Trust including, but not limited to: (i) fees and disbursements of its counsel
and independent pubic accountant; (ii) the preparation, filing, and printing of
Registration Statements and/or Prospectuses or SAIs; (iii) the preparation and
mailing of annual and interim reports, Prospectuses, SAIs, and proxy materials
to shareholders; (iv) such other expenses related to the communications with
persons who are shareholders of the Trust; and (v) the qualification of Shares
for sale under the securities laws of such jurisdictions as shall be selected by
the Trust pursuant to Paragraph 3(b) hereof, and the costs and
<PAGE>
expenses payable to each such jurisdiction for continuing qualification therein.
In addition, the Trust shall bear all costs of preparing, printing, mailing and
filing any advertisements and sales literature. TORS does not assume
responsibility for any expenses not assumed hereunder.
8. Compensation. As compensation for the services performed and the
expenses assumed by TORS under this Agreement including, but not limited to, any
commissions paid for sales of Shares, the Trust shall pay TORS as promptly as
possible after the last day of each month, a fee as set forth in Schedule B to
this Agreement.
9. Share Certificates. The Trust shall not issue certificates
representing Shares unless requested to do so by a shareholder. If such request
is transmitted through TORS the Trust will cause certificates evidencing the
Shares owned to be issued: in such names and denominations as TORS shall from
time to time direct.
10. Status of TORS. TORS is an independent contractor and shall be
agent of the Trust only with respect to the sale and redemption of Shares.
11. Indemnification. (a) The Trust agrees to indemnify, defend, and
hold TORS, its officers and directors, and any person who controls TORS within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) that TORS, its officers, directors, or
any such controlling person may incur under the 1933 Act, or under common law or
otherwise, arising out of or based upon any (i) alleged untrue statement of a
material fact contained in the Registration Statement, Prospectus, SAI or sales
literature, (ii) alleged omission to state a material fact required to be stated
or necessary to make the statements therein not misleading, or (iii) failure by
the Trust to comply with the terms of the Agreement; provided, that in no event
shall anything contained herein be so construed as to protect TORS against any
liability to the Trust or its shareholders to which TORS would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations under this Agreement.
(b) The Trust shall not be liable to TORS under this Agreement with
respect to any claim made against TORS or any person indemnified unless TORS or
such other person shall have notified the Trust in writing of the claim within a
reasonable time after the summons or other first written notification giving
information on the nature of the claim shall have been served upon TORS or such
other person (or after or the person shall have received notice of service on
any designated agent). However, failure to notify the Trust of any claim shall
not relieve the Trust from any liability that it may have to TORS or any person
against who such action is brought otherwise than on account of this Agreement.
(c) The Trust shall be entitled to participate at its own expense in
the defense or,
<PAGE>
if it so elects, to assume the defense of any suit brought to enforce any claims
subject to this Agreement. 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 indemnified defendants in the suit 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 indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Trust does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Trust agrees to promptly notify TORS of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of any of its Shares.
(d) TORS agrees to indemnify, defend, and hold the Trust, its officers
and trustees, and any person who controls the Trust within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending against such claims, demands, or liabilities and any counsel fees
incurred in connection therewith) that the Trust, its trustees, or officers, or
any such controlling person may incur under the 1933 Act, or under common law or
otherwise, resulting from TORS' willful misfeasance, bad faith or gross
negligence in the performance of its obligations and duties under this
Agreement, or arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by TORS to the Trust
for use in the Registration Statement, Prospectus or SAI arising out of or based
upon any alleged omission to state a material fact in connection with such
information required to be stated in either thereof or necessary to make such
information not misleading.
TORS shall be entitled to participate, at its own expense, in the
defense or, if TORS so elects, the defense shall be conducted by counsel chosen
by TORS and satisfactory to the indemnified defendants whose approval shall not
be unreasonably withheld. In the event that TORS elects to assume the defense of
any suit and retain counsel, the defendants in the suit shall bear the fees and
expenses of any additional counsel retained by them. If TORS does not elect to
assume the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by them.
12. Duration and Termination. (a) This Agreement shall become effective
on the date first written above or such later date as indicated in Schedule A
and, unless sooner terminated as provided herein, will continue in effect for
two years from the above written date. Thereafter, if not terminated, this
Agreement shall continue in effect for successive annual periods, provided that
such continuance is specifically approved at least annually (i) by a vote of a
majority of the Trust's Board who are neither interested persons (as defined in
the 1940 Act) of the Trust ("Independent Trustees") or cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the Board
or by vote of a majority of the outstanding voting securities of the Trust.
(b) Notwithstanding the foregoing, this Agreement may be terminated in its
<PAGE>
entirety at any time, without the payment of any penalty, by vote of the Board,
by vote of a majority of the Independent Trustees, or by vote of a majority of
the outstanding voting securities of the Trust on sixty days written notice to
TORS or by TORS at any time, without the payment of any penalty, on sixty days'
written notice to the Trust. This Agreement will automatically terminate in the
event of its assignment.
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought. This Agreement may be amended with the
approval of the Board or of a majority of the outstanding voting securities of
the Trust; provided, that in either case, such amendment also shall be approved
by a majority of the Independent Trustees.
14. Limitation of Liability. The Board and shareholders of the Trust
shall not be personally liable for obligations of the Trust in connection with
any matter arising from or in connection with this Agreement. This Agreement is
not binding upon any trustees, officers or shareholders of the Trust
individually, and no such person shall be individually liable with respect to
any action or inaction resulting from this Agreement.
15. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient upon receipt in writing at the
other party's principal offices.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only any in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
state, rule, or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Agreement,
the terms "majority of the outstanding voting securities," "interested person,"
and "assignment" shall have the same meaning as such terms have in the 1940 Act.
17. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Connecticut and the 1940 Act. To the extent that the
applicable laws of the State of Connecticut conflict with the applicable
provisions of the 1940 Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated as of the day and year
first above written.
ATTEST: T. O. RICHARDSON TRUST
___________________________ By:___________________________
Its
ATTEST: T. O. RICHARDSON SECURITIES, INC.
___________________________ By:___________________________
Its
<PAGE>
SCHEDULE A
to the
DISTRIBUTION AGREEMENT
Between
and
Pursuant to section I of the Distribution Agreement between the T. O.
RICHARDSON TRUST (the "Trust") and T.O. Richardson Securities, Inc. ("TORS"),
the Trust hereby appoints TORS as its agent to be the principal underwriter of
the Trust with respect to its following series:
T. O. Richardson Sector Rotation Fund
Dated _________________________, 1998
<PAGE>
SCHEDULE B
to the
DISTRIBUTION AGREEMENT
Between
T. O. RICHARDSON TRUST
And
T. O. RICHARDSON SECURITIES, INC.
As compensation pursuant to section 8 of the Distribution-Agreement between
T. O. Richardson Trust (the "Trust") and T.O. Richardson Securities, Inc.
("TORS"), the Trust shall pay to TORS the sum of
1. an annual fee of $15,000 for the first series of the Trust and $6,000
for each series thereafter or .02% of the average daily net assets of
each series, computed daily and paid monthly, whichever is greater,
2. the ongoing licensing fees and incidental costs of those employees of
T.O. Richardson Company, Inc. who are designated by TORS to become registered
representatives of TORS
3. the compensation paid by TORS to such registered representatives in
accordance with compensation schedules, as agreed upon by TORS from
time to time;
4. the reasonable fees associated with listing and maintaining shares on
the National Securities Clearing Corporation's Trust/SERV System, as
agreed upon by TORS
5. incidental expenses associated with printing and distributing
advertising and sales literature, such as filings with the National
Association of Securities Dealers, Inc.
6. please see Distribution Fee Schedule for more details.
Date: _________________________, 1998
<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT made as of June , 1998, between T.O. Richardson
Trust, a Massachusetts business trust (hereinafter called the ("Trust"), and
FIRSTAR TRUST COMPANY, a corporation organized under the laws of the State of
Wisconsin (hereinafter called "Custodian"),
WHEREAS, the Trust desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Trust and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Trust by any two of the
President, a Vice President, the Secretary and the Treasurer of the Trust, or
any other persons duly authorized to sign by the Board of the Trust.
The word "Board" shall mean Board of Trustees of the Trust.
2. Names, Titles, and Signatures of the Trust's Officers
An officer of the Trust will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section I hereof, and the names of the members of the Board,
together with any changes which may occur from time to time.
Additional Series. The T.O. Richardson Trust is authorized to issue
separate classes of shares of beneficial interest representing interests in
separate investment portfolios. The parties intend that each portfolio
established by the Trust, now or in the future, be covered by the terms and
conditions of this agreement.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or accounts
in the name of the Trust, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Trust. Custodian shall make payments of cash to, or for the
account of, the Trust from such cash only:
(a) for the purchase of securities for the portfolio of the Trust upon
the delivery of such securities to Custodian, registered in the name of the
Trust or of the nominee of Custodian referred to in Section 7 or in proper form
for transfer;
<PAGE>
(b) for the purchase or redemption of shares of the common stock of the
Trust upon delivery thereof to Custodian, or upon proper instructions from the
Trust;
(c) for the payment of interest, dividends, taxes, investment adviser's
fees or operating expenses (including, without limitation thereto, fees for
legal, accounting, auditing and custodian services and expenses for printing and
postage); for payments in connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Trust held by or to be delivered to
Custodian; or
(e) for other proper corporate purposes certified by resolution of the
Board. Before making any such payment, Custodian shall receive (and may rely
upon) an officer's certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officer's certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Trust issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received by Custodian for the account of
the Trust.
C. Custodian shall, upon receipt of proper instructions, make federal funds
available to the Trust as of specified times agreed upon from time to time by
the Trust and the custodian in the amount of checks received in payment for
shares of the Trust which are deposited into the Trust's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into which
account(s) may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any securities of
the Trust held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Trust upon receipt
by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or otherwise
become payable; for examination by any broker selling any such securities in
accordance with "street delivery" custom; in exchange for, or upon conversion
into, other securities alone or other securities and cash whether pursuant to
any plan of merger, consolidation reorganization, recapitalization or
readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms into other
securities;
<PAGE>
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary securities
for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the
Trust upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b), (d),
(e), (f), and (g), securities or cash receivable in exchange therefore shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and state that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officer's certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officer's certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Trust issues appropriate oral
or facsimile instructions to Custodian and an appropriate officer's certificate
is received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officer's certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Trust, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Trust; (b) collect interest and cash dividends received, with notice to
the Trust, for the account of the Trust; (c) hold for the account of the Trust
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Trust, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Trust's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officer's certificate, Custodian
shall register all securities, except such as are in bearer form, in the name of
a registered nominee of Custodian as defined in the Internal Revenue Code and
any Regulations of the Treasury Department issued hereunder or in any provision
of any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Trust shall from time to time furnish to Custodian appropriate
instruments to enable
<PAGE>
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee, any securities which it may hold for the account
of the Trust and which may from time to time be registered in the name of the
Trust.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Trust, except in
accordance with the instructions contained in an officer's certificate.
Custodian shall deliver, or cause to be executed and delivered, to the Trust all
notices, proxies and proxy soliciting materials with relation to such
securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Trust shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to exempt
from taxation any exempt transfers and/or deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto
Custodian shall not be liable for any action taken in good faith upon
any certificate herein described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
The Trust agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct.
<PAGE>
Custodian agrees to indemnify and hold harmless the Trust from all
charges, expenses, assessments, and claims/liabilities (including counsel fees)
incurred or assessed against it in connection with the performance of this
Agreement, except such as may arise from the Trust's own negligent action,
negligent failure to act, or willful misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust company
as a Subcustodian for all or any part of the Trust's assets, so long as any such
bank or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Twenty Million
Dollars ($20,000,000), and has had at least five years experience as custodian
for mutual funds, and provided further that, if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
responsible for any losses caused to the Trust by the Subcustodian as fully as
if the Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Trust requires the
Custodian to engage specific Subcustodians; for the safekeeping and/or clearing
of assets, the Trust agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Trust's assets, except as may
arise from its own negligent action, negligent failure to act or willful
misconduct.
12. Reports by Custodian
Custodian shall furnish the Trust periodically as agreed upon with a
statement summarizing all transactions and entries for the account of Trust.
Custodian shall furnish to the Trust, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, the Trust.
13. Termination or Assignment
This Agreement may be terminated by the Trust, or by Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Trust at Two
Bridgewater Road, Farmington, Connecticut 06032, as the case may be. Upon any
termination of this Agreement, pending appointment of a successor to Custodian
or a vote of the shareholders of the Trust to dissolve or to function without a
custodian of its cash, securities or other property, Custodian shall not deliver
cash, securities or other property of the Trust to the Trust, but may deliver
them to a bank or trust company of its own selection, having an aggregate
capital, surplus and undivided profits, as shown by its last published report of
not less than Twenty Million Dollars ($20,000,000), and has had at least five
years experience as custodian for mutual funds, as a Custodian for the Trust to
be held under terms similar to those of this Agreement, provided, however, that
Custodian shall not be required to make any such delivery or payment until full
payment shall have been made by the Trust of all liabilities constituting a
charge on or against the properties then held by Custodian or on or against
Custodian, and until full payment shall have been made to Custodian of all its
fees compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the consent of
the Trust authorized
<PAGE>
or approved by a resolution of its Board of Trustees.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Trustees of the Trust approves by resolution the
use of such central securities clearing agency or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or maintains any
records required to be maintained and preserved by the Trust pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder Custodian agrees to make any such records
available to the Trust upon request and to preserve such records for the periods
prescribed in Rule 3 1 a-2 under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
Attest: FIRSTAR TRUST COMPANY
______________________________ By ___________________________
Assistant Secretary Vice President
Attest: T.O. RICHARDSON TRUST
_______________________________ By _____________________________
<PAGE>
FUND ADMINISTRATION SERVICING AGREEMENT
This agreement is made and entered into on this _____ day of __________1998, by
and between T.O. Richardson Trust, a Massachusetts business trust (the "Trust")
created pursuant to that certain Declaration of Trust of the Trust dated June 2,
1998, as amended from time to time (the "Declaration") and Firstar Trust
Company, a corporation organized under the laws of the State of Wisconsin
(hereinafter referred to as "FTC").
WHEREAS, The Trust is an open-ended management investment company which is
registered under the Investment Company Act of 1940 (the "Investment Company
Act");
WHEREAS, FTC is a trust company and, among other things, is in the business of
providing fund administration services for the benefit of its customers; and
WHEREAS, the Trust desires to retain First Star to provide fund administration
services of the Trust's operations in respect of the T.O. Richardson Sector
Rotation Fund, and such additional funds which the Trust may establish from time
to time, subject to the control of the Board of Trustees of the Trust.
NOW, THEREFORE, the Trust and FTC do mutually promise and agree as follows:
I. Appointment of Administrator
The Trust hereby appoints FTC as Administrator of the Trust on the
terms and conditions set forth in this Agreement, and FTC hereby
accepts such appointment and agrees to perform the services and duties
set forth in this Agreement in consideration of the compensation
provided for herein.
FTC shall provide such services subject to the control of the Board of
Trustees of the Trust and in compliance with such policies as the
Trustees may from time to time establish, and in compliance with the
policies and limitations for the Trust set forth in the Trust's
Prospectus and Statement of Additional Information, in each case as
amended from time to time, and applicable laws and regulations.
II. Duties and Responsibilities of FTC
A. General Trust Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
<PAGE>
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and
director and officers liability coverage,
and making the necessary SEC filings
relating thereto
3. Audits
a. Prepare appropriate schedules and assist
independent auditors
b. Provide information to SEC and facilitate audit
process
c. Provide office facilities
4. Assist in overall operations of the Trust
B. Compliance
1. Regulatory Compliance
a. Periodically monitor compliance with Investment Company
Act of 1940 requirements
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of Ethics
b. Periodically monitor the Trust's compliance
with the policies and investment limitations
of the Trust as set forth in its prospectus
and statement of additional information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state
securities authorities any and all required
compliance filings relating to the
registration of the securities of the Trust
so as to enable the Trust to make a
continuous offering of its shares
b. Monitor status and maintain registrations
in each state
3. SEC Registration and Reporting
a. Assisting the Trust's counsel in updating prospectus
and statement of additional information; and in
preparing proxy statements, and Rule 24f-2 notice,
<PAGE>
b. Annual and semiannual reports
4. IRS Compliance
a. Periodically monitor the Trust's status as a
regulated investment company under
Subchapter M of the Internal Revenue Code
through review of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirement
b. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by the Fund Prospectus
and Statement of Additional Information
2. Prepare financial reports for shareholders, the Board
of Trustees of the Trust, the SEC, and independent
auditors
3. Supervise the Trust's Custodian and the Fund's
Accountants in the maintenance of the Fund's general
ledger and in the preparation of the Trust's
financial statements including oversight of expense
accruals and payments, of the determination of net
asset value of the Trust's net assets and of the
Trust's shares, and of the declaration and payment of
dividends and other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal
and state tax returns including forms 1120/8610 with
any necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
III. Compensation
The Trust agrees to pay FTC for performance of the duties listed in
this Agreement and the fees and out-of pocket expenses as set forth in
the attached
<PAGE>
Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Trust and FTC.
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
IV. Additional Series
In the event that the Trust establishes one or more series of shares
with respect to which it desires to have FTC render fund administration
services, under the terms hereof, it shall so notify FTC in writing,
and if FTC agrees in writing to provide such services, such series will
be subject to the terms and conditions of this Agreement, and shall be
maintained and accounted for by FTC on a discrete basis. The Fund
currently covered by this Agreement is T.O. Richardson Company Sector
Rotation Fund.
V. Year 2000 Compliance: Performance of Service; Limitation of Liability;
Indemnification
A. FTC has (i) undertaken a detailed review and assessment of all
areas within its business and operations that could be adversely
affected by the "Year 200 Problem" (that is, the risk that
computed applications used by FTC may be unable to recognize and
perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999, but before
December 31, 1999), (ii) developed a detailed plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (iii)
to date, implemented that plan in accordance with the timetable.
FTC reasonably anticipates that all computer applications that
are material to its business and operations, including, among
other things, providing fund administration services for the
benefit of its customers, will on a timely basis be able to
perform properly date-sensitive functions for all dates before
and after January 1, 2000, (that is, to be "Year 2000
compliant"). FTC has made inquiry of each of its key suppliers
and vendors as to whether such persons will on a timely basis be
Year 2000 compliant in all material respects and on the basis of
that inquiry believes that all such persons will be so compliant.
For purposes hereof, "key suppliers and vendors" refers to those
suppliers and vendors of FTC the business failure of which would,
with reasonable probability, be expected to have a material
adverse effect or from which a substantial amount of information
and data is obtained and entered into FTC's computed
applications.
<PAGE>
FTC shall exercise reasonable care in the performance of its
duties under this Agreement. FTC shall not be liable for any
error of judgement or mistake of law or for any loss suffered
by the Trust in connection with matters to which this
Agreement relates, including losses resulting from mechanical
breakdowns or the failure of communication or power supplies
beyond FTC's control, except a loss resulting from FTC's
refusal or failure to comply with the terms of this Agreement
or from bad faith, negligence, or willful misconduct on its
part in the performance of its duties under this Agreement.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control FTC shall
take all reasonable steps to minimize service interruptions
for any period that such interruption continues beyond FTC's
control. FTC will make every reasonable effort to restore any
lost or damaged data and correct any errors resulting from
such a breakdown at the expense of FTC. FTC agrees that it
shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency
use of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of the
Trust shall be entitled to inspect FTC's premises and
operating capabilities at any time during regular business
hours of FTC, upon reasonable note to FTC.
Regardless of the above, FTC reserves the right to reprocess
and correct administrative errors at its own expense.
B. The Trust shall indemnify and hold harmless FTC from and
against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law)
of any and every nature (including reasonable attorneys'
fees) which FTC may sustain or incur or which may be
asserted against FTC by any person arising out of any action
taken or omitted to be taken by it in performing the
services hereunder (i) in accordance with the foregoing
standards (set forth in paragraph B of this Section V), or
(ii) in reliance upon any written or oral instruction
provided to FTC by any duly authorized officer of the Trust,
such duly authorized officer to be included in a list of
authorized officers furnished to FTC and as amended from
time to time in writing by resolution of the Board of
Trustees of the Trust except to the extent that any claims,
demands, losses, expenses, and liabilities are found by a
court of competent jurisdiction in a judgement which has
become final in that it is no longer subject to appeal or
review to have resulted primarily from FTC's bad faith,
negligence or willful misconduct on its part in the
performance of its duties under this Agreement and except as
may otherwise be provided under provisions of
<PAGE>
applicable state law or federal securities laws which cannot
be waived or modified hereby. In order that the
indemnification provisions contained in this section shall
apply, it is understood that if in any case the Trust may be
asked to indemnify or hold FTC harmless, the Trust shall be
fully and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood that
FTC will use all reasonable care to 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. The Trust shall have the option to defend
FTC against any claim, which may be the subject of this
indemnification. In the event that the Trust so elects, it
will so notify FTC and thereupon the Trust shall take over
complete defense of the claim, and FTC shall in such situation
initiate no further legal or other expenses for which it shall
seek indemnification under this section. FTC shall in no case
confess any claim or make any compromise in any case in which
the Trust will be asked to indemnify FTC except with the
Trust's prior written consent.
C. FTC shall indemnify and hold the Trust harmless from and
against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of
any and every nature (including reasonable attorneys' fees)
which may be asserted against the Trust by any person arising
out of any action taken or omitted to be taken by FTC as a
result of FTC's refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or willful
misconduct.
VI. Confidentiality
FTC shall handle, in confidence, all information relating to the
Trust's business which is received by FTC during the course of
rendering any service hereunder.
VII. Data Necessary to Perform Service
The Trust or its agent, which may be FTC, shall furnish to FTC the data
necessary to perform the services described herein at times and in such
form as mutually agreed upon.
VIII. Terms of Agreement
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue automatically in
effect for successive annual periods. The Agreement may be terminated
by either party upon giving ninety (90) days prior written notice to
the other party or such shorter
<PAGE>
period as is mutually agreed upon by the parties.
IX. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any
of FTC's duties or responsibilities hereunder is designated by the
Trust by written notice to FTC, FTC will promptly, upon such
termination and at the expense of the Trust, transfer to such successor
all relevant books, records, correspondence, and other data established
or maintained by FTC under this Agreement in a form reasonably
acceptable to the Trust (if such form differs from the form in which
FTC has maintained, the Trust shall pay any expenses associated with
transferring the data to such form), and will cooperate in the transfer
of such duties and responsibilities, including provision for assistance
from FTC's personnel in the establishment of books, records, and other
data by such successor.
X. Choice of Law
This Agreement shall be construed in accordance with the internal laws
of the State of Wisconsin, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed
as being inconsistent with the Investment Company Act.
XI. Notices
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FTC shall be sent to Firstar Trust Company Mutual
Trust Services, 615 East Michigan Street, Milwaukee, WI 53202,
Attn:_____________, and notice to the Trust shall be sent to T.O.
Richardson Trust, Two Bridgewater Road, Farmington, CT 06032-2256,
Attn: Samuel Bailey, Jr., President.
XII. Records
FTC shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Trust but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of the Investment Company Act, and the rules
thereunder. FTC agrees that all such records prepared or maintained by
FTC relating to the services to be performed by FTC hereunder are the
property of the Trust and will be preserved, maintained, and made
available with such section and rules of the Investment Company Act and
will be promptly surrendered to the Trust on and in accordance with its
request.
<PAGE>
T. O. RICHARDSON TRUST FIRSTAR TRUST COMPANY
By: _______________________ By: __________________________
Attest: ____________________ Attest: ________________________
<PAGE>
FUND ACCOUNTING SERVICING AGREEMENT
This contract between T.O. Richardson Trust, a Massachussetts business trust,
hereinafter called the "Trust," and Firstar Trust Company, a Wisconsin
corporation, hereinafter called "FTC," is entered into on this __ day of _______
1998.
WHEREAS, the Trust is an open-end management investment company registered under
the Investment Company Act of 1940; and
WHEREAS, FTC is in the business of providing, among other things, mutual fund
accounting services to investment companies;
NOW, THEREFORE, the parties do mutually promise and agree as follows:
1. Services. FTC agrees to provide the following mutual fund accounting
services to the Trust:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis
using security trade information communicated from
the investment manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Trustees and apply
those prices to the portfolio positions. For those
securities where market quotations are not readily
available, the Board of Trustee shall approve, in
good faith, the method for determining the fair value
for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on
investments for the accounting period.
(4) Determine gain/loss on security sales and identify
them as to short or long-term status; account for
periodic distributions of gains or losses to
shareholders and maintain undistributed gain or loss
balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense
accrual amounts as directed by the Trust as to
methodology, rate or dollar amount.
(2) Record payments for Trust expenses upon receipt of
written authorization from the Trust.
<PAGE>
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail,
as agreed upon by FTC and the Trust.
(4) Provide the necessary financial information to
support the taxable components of income and capital
gains distributions to the transfer agent to support
tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund
accounting records available to the Trust, the
Securities and Exchange Commission, and the outside
auditors.
(2) Maintain accounting records according to the
Investment Company Act of 1940 and regulations
provided thereunder.
2. Pricing of Securities. For each valuation date, obtain prices from a
pricing source selected by FTC but approved by the Trust's Board and
apply those prices to the portfolio positions. For those securities
where market quotations are not readily available, the Trust's Board
shall approve, in good faith, the method for determining the fair value
for such securities.
If the Trust desires to provide a price which varies from the pricing
source, the Trust shall promptly notify and supply FTC with the
valuation of any such security on each valuation date. All pricing
changes made by the Trust will be in writing and must specifically
identify the securities to be changed by CUSIP, name of security, new
price or rate to be applied, and, if applicable, the time period for
which the new price(s) is/are effective.
3. Changes in Accounting Procedures. Any resolution passed by the Trust's
Board that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by the
FTC.
4. Changes in Equipment, Systems, Service, Etc. FTC reserves the right to
make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment,
so long as such changes do not adversely affect the service provided to
the Trust under this Agreement.
5. Compensation. FTC shall be compensated for providing the services set forth
in this Agreement in accordance with the Fee Schedule attached hereto as Exhibit
A and as mutually agreed upon and amended from time to time.
<PAGE>
6. Performance of Service.
A. FTC shall exercise reasonable care in the performance of its duties
under this Agreement. FTC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the failure of
communication or power supplies beyond FTC's control, except a loss
resulting from FTC's refusal or failure to comply with the terms of
this Agreement or from bad faith, negligence, or willful misconduct on
its part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Trust shall
indemnify and hold harmless FTC from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable
attorneys' fees which FTC may sustain or incur or which may be
asserted against FTC by any person arising out of any action taken or
omitted to be taken by it in performing the services hereunder (i) in
accordance with the foregoing standards, or (ii) in reliance upon any
written or oral instruction provided to FTC by any duly authorized
officer of the Trust, such duly authorized officer to be included in a
list of authorized officers furnished to FTC and as amended from time
to time in writing by resolution of the Board of Trustees of the
Trust.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FTC shall
take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond FTC's control.
FTC will make every reasonable effort to restore any lost or
damaged data and correct any errors resulting from such a
breakdown at the expense of FTC. FTC agrees that it shall, at all
times, have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Trust shall be
entitled to inspect FTC's premises and operating capabilities at
any time during regular business hours of FTC, upon reasonable
notice to FTC.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the
Trust may be asked to indemnify or hold FTC harmless, the Trust
shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that FTC will use all reasonable care to 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.
<PAGE>
The Trust shall have the option to defend FTC against any claim
which may be the subject of this indemnification. In the event
that the Trust so elects, it will so notify FTC and thereupon the
Trust shall take over complete defense of the claim, and FTC
shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this
section. FTC shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to
indemnify FTC except with the Trust's prior written consent.
C. FTC shall indemnify and hold the Trust harmless from and against
any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every
nature (including reasonable attorneys' fee which may be asserted
against the Trust by any person arising out of any action taken
or omitted to be taken by FTC as a result of FTC's refusal or
failure to comply with the terms of this Agreement, its bad
faith, negligence, or willful misconduct.
7. Records. FTC shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it
may deem advisable and as agreeable to the Trust but not inconsistent
with the rules and regulations of appropriate government authorities,
in particular, Section 31 of The Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules thereunder. FTC
agrees that all records prepared or maintained by FTC relating to the
services to be performed by FTC hereunder are the property of the
Trust and will be preserved, maintained, and made available with such
section and rules of the Investment Company Act and will be promptly
surrendered to the Trust on and in accordance with its request.
8. Confidentiality. FTC shall handle in confidence all information
relating to theTrusts' business which is received by FTC during the
course of rendering any service hereunder.
9. Data Necessary to Perform Services. The Trust or its agent, which may be
FTC, shall furnish to FTC the data necessary to perform the services
described herein at such times and in such form as mutually agreed upon.
10. Notification of Error. The Trust will notify FTC of any balancing or
control error caused by FTC within three (3) business days after receipt
of any reports rendered by FTC to the Trust, or within three (3)
business days after discovery of any error or omission not covered by
the balancing or control procedure, or within three (3) business days of
receiving notice from any shareholder.
11. Additional Series. In the event that the Fund establishes one or more
series of shares with respect to which it desires to have FTC render
accounting services, under the terms hereof, it shall so notify FTC in
writing, and if FTC agrees in writing to provide services, such series
will be subject to the terms and conditions
<PAGE>
of this Agreement, and shall be maintained and accounted for by FTC on a
discrete basis. The portfolio currently covered by this Agreement is:
T.O. Richardson Sector Rotation Fund.
12. Term of Agreement. This Agreement may be terminated by either party upon
giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between
the parties.
13. Duties in the Event of Termination. In the event that in connection
with termination a Successor to any of FTC's duties or
responsibilities hereunder is designated by the Fund by written notice
to FTC, FTC will promptly, upon such termination and at the expense of
the Fund, transfer to such Successor all relevant books, records,
correspondence and other data established or maintained by FTC under
this Agreement in a form reasonably acceptable to the Fund (if such
form differs from the form in which FTC has maintained the same, the
Fund shall pay any expenses associated with transferring the same to
such form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FTC's
personnel in the establishment of books, records and other data by
such successor.
14. Notices. Notices of any kind to be given by either party to the other
party shall be in writing and shall be duly given if mailed or delivered
as follows: Notice to FTC shall be sent to Firstar Trust Company Mutual
Fund Services, 615 East Michigan Street, Milwaukee, WI 53202, Attention:
and notice to Trust shall be sent to T.O. Richardson Trust, Two
Bridgewater Road, Farmington, CT 06032, Attention: Samuel Bailey, Jr.
15. Choice of Law. This Agreement shall be construed in accordance with the
laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
ATTEST: Firstar Trust Company
____________________________ By__________________________
ATTEST: T.O. Richardson Trust
_____________________________ By___________________________
<PAGE>
FULFILLMENT SERVICING AGREEMENT
This Agreement between Firstar Trust Company ("FTC") and T. O. Richardson Trust
(the "Trust") is entered into on this ____day of ___________ 1998.
WHEREAS, the Trust provides investment opportunities to prospective shareholders
through a family of open end mutual funds; and
WHEREAS, FTC provides fulfillment services to mutual funds;
NOW, THEREFORE, the parties agree as follows:
Duties and Responsibilities of FTC
1. Answer all prospective shareholder calls concerning any of the Trust's
funds listed in the attached Schedule A which may be modified from time
to time.
2. Send all available fund(s) materials requested by the prospect which
may include the prospectus, SAI and other material within 24 hours from
time of call.
3. Receive and update all the Trust fulfillment literature so that most
current information is sent and quoted.
4. Provide 24 hour answering service to record prospect calls made after
hours (7 p.m. to 8 a.m. CT).
5. Maintain and store the Trust fulfillment inventory.
6. Send periodic fulfillment reports to the Trust as agreed upon between the
parties.
Duties and Responsibilities of the Trust
1. Provide the Trust fulfillment literature updates to FTC as necessary.
2. Supply FTC with sufficient inventory of fulfillment materials as
requested from time to time by FTC.
3. Provide FTC with any sundry information about the Trust in order to
answer prospect questions.
Compensation
The Trust agrees to compensate FTC for the services performed under this
agreement in accordance with the attached Schedule B; the Trust agrees to pay
all invoices within ten days of receipt.
<PAGE>
Proprietary and Confidential Information
FTC agrees on behalf of itself and its directors, officers, and employees to
treat as confidential and as proprietary information of the Trust all records
and other information relative to the Trust and prior, present, or potential
shareholders of the Trust (and clients of said shareholders), 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 when FTC 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.
Termination
This agreement may be terminated by either party upon 30 days written notice.
Dated this __________ day of ___________1998
FIRSTAR TRUST COMPANY T. O. RICHARDSON TRUST
By: ____________________________ By: ___________________________
Attest: _________________________ Attest: _________________________
<PAGE>
T.O. RICHARDSON TRUST
CONSENT TO USE OF NAME
WHEREAS, T.O. RICHARDSON COMPANY, INC., ("TORC") is creating a
mutual fund to be known as T.O. RICHARDSON TRUST (the "Trust");
WHEREAS, the Trust is of the type known as a series fund and may
consist of separate series of shares (each a "Fund" and together, the "Funds");
and
WHEREAS, it is advantageous for TORC to have the Trust and the Funds
created use the names "T.O. Richardson" or "Richardson";
NOW, THEREFORE, in consideration of the benefits to be derived by TORC
and the promises made herein, the parties hereby agree as follows:
1. TORC consents to the use by the Trust and its Funds of the
identifying names "T.O. Richardson" and "Richardson", each of which is a
property right of TORC.
2. The Trust and its Funds agree to use the names "T.O. Richardson" or
"Richardson" only as a component of their names and for no other purposes, and
will not purport to grant to any third party the right to use the names "T.O.
Richardson" or "Richardson" for any purpose.
3. TORC or any corporate affiliate of TORC may use or grant to others
the right to use the name "T.O. Richardson" or "Richardson" as all or a portion
of a corporate or business name or for any commercial purpose, including a grant
of such right to any other investment company. At the request of TORC, the Trust
and its Funds will take such action as may be required to provide their consent
to the use of the names "T.O. Richardson" and "Richardson" by TORC, or any
corporate affiliate of TORC, or by any person to whom TORC or any affiliate of
TORC shall have granted the right to use of the name "T.O. Richardson" or
"Richardson".
4. Upon the termination of any investment advisory or management
agreement or underwriting agreement into which TORC or any affiliate of TORC and
the Trust and its Funds may enter, the Trust and its Funds shall, upon the
request of TORC, cease to use the names "T.O. Richardson" or "Richardson" as a
component of their names, and shall not use such names as a part of their names
or for any other commercial purpose, and shall cause the officers and trustees
of the Trust and the Funds to take any and all actions which TORC may request to
effect the foregoing and to reconvey to TORC or such corporate affiliate any and
all rights to such name.
5. The Declaration 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 Agreement is made and executed on behalf of the Trust, and not by the
trustees or officers of the Trust individually, and the obligations of or
arising out of this Agreement are not binding
-1-
<PAGE>
upon the trustees, officers or shareholders of the Trust individually, but are
binding only upon the assets and the property of the Trust and its Funds.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this ____ day of __________, 1998.
T.O. RICHARDSON COMPANY, INC.
By: /s/Samuel Bailey, Jr.
Samuel Bailey, Jr.
T.O. RICHARDSON TRUST
By: /s/Samuel Bailey, Jr.
Samuel Bailey, Jr.
-2-
<PAGE>
CONSENT TO SERVICE AS A TRUSTEE
The undersigned person is named as a Trustee of T.O. Richardson Trust
in the Statement of Additional Information included as a part of the
Registration Statement on Form N-1A filed by T.O. Richardson Trust under the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended, and hereby consents to the use of his name in such Statement of
Additional Information.
Samuel Bailey, Jr. /s/Samuel Bailey, Jr.
June 29, 1998
<PAGE>
SUBSCRIPTION AGREEMENT
August __, 1998
T.O. RICHARDSON TRUST
Two Bridgewater Road
Farmington, Connecticut 06032
Ladies and Gentlemen:
T.O. Richardson Trust (the "Trust") proposes to issue and sell to the
public its shares of beneficial interest without par value (the "Shares")
pursuant to a registration statement on Form N-1A (the "Registration Statement")
filed with the Securities and Exchange Commission. The Trust currently consists
of one series namely, the T.O. Richardson Sector Rotation Fund (the "Fund"). In
order to provide the Trust with a net worth of at least $100,000 as required by
Section 14 of the Investment Company Act of 1940, as amended, we hereby offer to
purchase 10,000 Shares of the Fund at a price of $10.00 per Share prior to the
effective date of the Registration Statement.
We will make payment for the Shares by delivery of a certified or
official bank check in the amount of $100,000 payable to the order of the Trust
or by wire transfer prior to the date specified by the Trust as the proposed
effective date of the Registration Statement.
We represent and warrant to the Trust that the Shares are being
acquired by us for investment and not with a view to the resale or further
distribution thereof and that we have no present intention to redeem the Shares.
-1-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
T.O. RICHARDSON COMPANY, INC.
By /s/Samuel Bailey, Jr.
Samuel Bailey, Jr.
Confirmed, as of the date first above written.
T.O. RICHARDSON TRUST
By /s/Samuel Bailey, Jr.
Samuel Bailey, Jr.
Chairman of the Board of
Trustees and President
-2-
<PAGE>
