AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
DECEMBER 22, 1998
SECURITIES ACT REGISTRATION NO. 333- 58185
INVESTMENT COMPANY ACT REGISTRATION NO. 811-8849
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.2
POST-EFFECTIVE AMENDMENT NO. __
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2
T.O. RICHARDSON TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO BRIDGEWATER ROAD
FARMINGTON, CONNECTICUT 06032-2256
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
========================================================= ====================
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, NW
WASHINGTON, D.C. 20036
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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.
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Subject to completion, dated December 22, 1998
PROSPECTUS
dated December ___, 1998
T.O. RICHARDSON SECTOR ROTATION FUND
Two Bridgewater Road
Farmington, Connecticut 06032-2256
1-800 643-7477
The investment objective of the Fund is to seek capital appreciation
while providing some protection against down markets. The Fund's investment
advisor allocates assets mainly among equity securities of companies within
industry sectors it determines have the greatest potential for market
appreciation.
As with all mutual funds, the U.S. Securities and Exchange Commission
does not guarantee the accuracy or completeness of this Prospectus and does not
determine whether the Fund is a good investment. It is a criminal offense to
suggest otherwise.
The information in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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TABLE OF CONTENTS
Page No.
HIGHLIGHTS................................................
SECTORS THE FUND WILL INVEST IN...........................
THE FUND'S INVESTMENT POLICIES ...........................
THE MANAGEMENT OF THE FUND................................
HOW FUND SHARES ARE PRICED................................
PURCHASING SHARES OF THE FUND.............................
INDIVIDUAL RETIREMENT ACCOUNTS............................
REDEEMING SHARES OF THE FUND..............................
EXCHANGING FUND SHARES FOR SHARES OF OTHER FUNDS..........
DIVIDENDS, CAPITAL GAINS AND TAX TREATMENT................
THE YEAR 2000 ISSUE.......................................
FUND INVESTMENT PERFORMANCE...............................
ADDITIONAL INFORMATION....................................
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the Statement
of Additional Information ("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.
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Highlights
What are the Fund's Investment Goals and Objectives?
The investment objective of the Fund is to seek capital appreciation with some
protection against down markets. To accomplish this goal, the Fund's Advisor
allocates the Fund's assets mainly among the stocks of companies within
particular sectors or industries within the U.S. economy. The Advisor chooses
sectors based on their potential for appreciation relative to other sectors, and
relative to the stock market as a whole. 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.
What is the Fund's Investment Strategy?
The Fund's Advisor believes that limiting losses is as important to building
capital as maximizing gains. To accomplish this goal, the Advisor makes
investments in rising markets and industry sectors, and may invest portions or
all of the Fund in money market investments for capital preservation in falling
markets and sectors.
The Fund will invest in five or more industry sectors that offer the greatest
market appreciation during each market cycle. A market cycle is a period of time
in which market prices rise to a peak, fall to a trough and then rise again to a
baseline. Within each sector, the Fund expects to invest in five or more stocks.
The average market capitalization (i.e., the price of a company's stock
multiplied by the number of its outstanding shares) of the issuers of these
stocks will vary widely.
The Advisor conducts extensive research to determine which sectors of the
economy offer the most investment opportunity, and which sectors offer the
least, at any point in time. When the Advisor finds that sectors it selected
previously are facing slower or negative growth, it will move out of these
sectors. If the Advisor finds that there are no sectors of the economy offering
investment opportunity greater than the return on short-term money market
instruments, the Fund will invest in such instruments until the
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situation changes. Up to 100% of the Fund's assets can be invested in short-term
money market instruments. Typically, some of the Fund's assets may be held in
short-term money market instruments and cash to pay redemption requests and
expenses of the Fund.
Descriptions of many of the sectors in which the Fund may invest are located in
the section of the prospectus called "Sectors of the Economy the Fund Will
Invest In."
What are the Principal Risks of Investing in the Fund?
Because the Fund can be volatile over the short-term, it is suitable for
long-term investors only and is not designed as a short-term investment. The
share price of the Fund will fluctuate and may, at redemption, be worth more or
less than the initial purchase price. As a result, you could lose money.
Investors in the Fund will be exposed to the natural market risks that exist
with any investment in equity securities, which include the possibility that
stock prices in general will decline, or that the individual stocks selected for
the Fund will decline in price. Other risks include changes in general economic
trends (e.g. employment levels, economic growth, interest rate levels, currency
exchange rates), supply and demand fluctuations, competition, the pace of
technological change and the risk of obsolescence, consumer tastes and domestic
and international economic, political and regulatory developments.
Specific Risks Associated With a Sector Rotation Approach to
Investment Management Include:
Concentration in Industry Sectors. The Fund's investment strategy may call for
investments of as much as 20% of the Fund's capital in each of five concentrated
industry groups. There is the risk that one or more industry groups may lose
favor with investors and fall rapidly in value due to news events that quickly
affect the market's perception of the industry.
Risks of Investing in Particular Sectors. Each industry sector is
affected by its own particular risks which may not affect other
sectors. Sectors which rely upon the development of new
technology such as Biotechnology, Computers, Electronics, Health
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Care and Telecommunications are particularly affected by rapid product
obsolescence, government regulation and intense competition. Cyclical
Industries, Financial Service Industries, Natural Resources and Utilities may be
subject to risks of interest rate fluctuations, market cycles and international
markets.
Portfolio Turnover. The Fund's investment strategy involves tracking and
investing in industry sectors that are advancing in value faster than other
industry sectors. Purchase and sale of sectors is determined by market dynamics
which may at times call for buying and holding industry sectors for only short
periods of time. One risk of the strategy is that high portfolio turnover can
lead to increased brokerage commissions or dealer mark-ups or other transaction
costs on purchases and sales of securities. 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. Very high portfolio
turnover could adversely affect performance of the Fund.
Investment in Cash. One of the Fund's objectives is to invest in cash positions
when there are fewer than five industry sectors providing short or medium term
returns greater than money market returns. This usually occurs when broad
markets are declining rapidly. The purpose of the strategy is to protect
principal in falling markets. There is a risk that the industry sectors will
begin to rise rapidly and that the Fund will not be able to reinvest the cash
position into advancing industry sectors quickly enough to capture the initial
returns of changing market conditions.
Exposure to Foreign Markets. American Depositary Receipts ("ADR"s) of foreign
companies and equity securities of U.S. companies with substantial foreign
operations may involve additional risks related to political, economic or
regulatory conditions in foreign countries. Securities of companies in emerging
countries can be more volatile and less liquid than securities of companies in
fully developed countries.
Such risks include those related to general economic trends (e.g. employment
levels, economic growth, interest rate levels, currency exchange rates), supply
and demand fluctuations, competition, the pace of technological change and the
risk of obsolescence, consumer tastes and domestic and international
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economic, political and regulatory developments.
For descriptions of the risks involved in investing in particular sectors, see
the SAI.
Who is the Fund's Advisor?
T.O. Richardson Company, Inc. (the "Advisor") serves as investment advisor to
the Fund. The Advisor does extensive quantitative (mathematical) investment
research, and applies the results of this research to help clients meet their
financial objectives. As of the date of this Prospectus, the Advisor managed
approximately $220 million.
What Risk and Return Information is Available About the Fund?
Because the Fund is new, there is no performance information available at this
point. Once the Fund has an annual total return for at least one calendar year,
the Fund will have a bar chart and table showing the Fund's annual total return
compared to the returns of at least one stock market index, such as the S&P 500
Index.
The point of including that information is to show some of the risks of
investing in the Fund, such as the changes in the Fund's performance from year
to year, and how its average annual returns compare with a broad measure of
market performance.
Of course, investment performance only shows how the Fund has performed in the
past, it does not tell you how it will perform in the future.
What are the Costs of Investing in the Fund?
This table shows you the fees and expenses that investors in the Fund
will pay.
Shareholder Fees (fees paid directly from the amount of your
investment)
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Maximum Sales Charge Imposed on Purchases.....................None
Maximum Deferred Sales Charge.................................None
Maximum Sales Charge Imposed on Reinvested Dividends
or other Distributions.....................................None
Redemption Fee...............................................1.25%(1)
Exchange Fee..................................................None(2)
Annual Fund Operating Expenses (expenses deducted from
the Fund as a percentage of average net assets)
Management Fees 1.50%
Distribution (Rule 12b-1) and/or Service Fees None
Other Expenses .48%(3)
Total Annual Fund Operating Expenses
1.98%(3)
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(1)
The Fund charges a fee of 1.25% on redemptions of Fund shares held for
less than one year. This fee is paid to the Fund. This fee is waived
for Fund shareholders who were previously private clients of the
Advisor. If you redeem shares by wire, you may be charged a $12 service
fee. See " Redeeming Shares of the Fund."
(2)
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 "Exchanging
Fund Shares for Shares of Other Funds."
(3) "Other Expenses" have been estimated for the current fiscal year
since the Fund did not begin operations until December 31, 1998. Until
October 31, 1999, the Advisor has agreed to waive its management fee
and/or reimburse the Fund's other expenses to the extent necessary to
ensure that the total annual operating expenses do not exceed 1.95% of
the Fund's average net assets. After such date, the total operating
expenses limitations may be terminated or revised at any time. "Other
Expenses" are presented before any such waivers or reimbursements. If
the actual amount estimated for "Other Expenses" is adjusted to show
the effect of any such waiver or reimbursement, Other Expenses and
Total
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Annual Operating Expenses for the Fund are expected to be 0.45% and
1.95% respectively. Any waiver or reimbursement is subject to later
adjustment to allow the Advisor to recoup amounts waived or reimbursed
to the extent actual fees and expenses for a period are less than the
expense limitation caps, provided, however, that the Advisor shall only
be entitled to recoup such amounts for a period of three years from the
date such amount was waived or reimbursed.
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 assumptions we have made for this example are:
1.You invest $10,000 in the Fund.
2.Your investment has a 5% return each year.
3.The Fund's operating expenses remain the same.
Based on these assumptions, your cost to hold Fund shares for just one year
would be $201. If you held Fund shares for three years, the cost would be
$621.
If you did not redeem your shares
and held the Fund for one year, you would pay
$201
If you did not redeem your shares and held the Fund for three years, you would
pay $621.
Sectors the Fund Will Invest In
Some of the sectors the Fund may choose to invest in are described here. The
Fund may choose to invest in sectors that are not listed below. The SAI includes
complete descriptions of each sector listed below.
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Basic Materials
Companies that manufacture, mine, process or distribute raw materials and
intermediate goods used in building and manufacturing.
Biotechnology
Companies that research, develop and manufacture various biotechnological
products, services, and processes.
Business Services
Companies that provide business-related services such as data processing,
consulting, outsourcing, temporary employment market research or data base
services, printing, advertising, computer programming, credit reporting, claims
collection, mailing and photocopying to companies and other organizations.
Computers
Companies that research, design, develop, manufacture, or distribute products,
processes, or services that relate to hardware technology within the computer
industry.
Cyclical Industries
Companies involved in the supply or sale of materials, equipment, products or
services related to cyclical industries such as the automotive, chemical,
construction and housing, defense and aerospace, environmental services,
industrial equipment and materials, paper and forest products, and
transportation industries.
Electronics
Companies that design, manufacture, or sell electronic components and systems.
Energy
Companies in the energy industry, including oil, gas, electricity, and coal, and
alternative sources of energy such as nuclear, oil shale, and solar power.
Energy Services
Companies that provide services and equipment to firms in the energy industry.
Environmental Services
11
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Companies in the waste management or pollution control business.
Financial Services
Companies in the financial services industry including insurance companies,
brokerage firms, banks, etc.
Food and Agriculture
Companies that make or distribute food, beverages, and agricultural products.
Health Care
Companies that make or sell products used in heath care.
Health Care Services
Companies that own or run hospitals, nursing homes, health maintenance
organizations, and other companies specializing in the delivery of health care
services.
Industrial Equipment
Companies that make equipment used by industry, such as farm equipment,
computers, and industrial machinery.
Leisure
Companies in the leisure and entertainment business.
Medical Equipment
Companies that make or sell medical equipment and devices and related
technologies.
Multimedia
Companies that make or sell products and services used in the broadcast and
media industries.
Natural Resources
Companies that own or develop natural resources, or supply goods and services to
companies in the natural resources business.
Precious Metals and Minerals
Companies that explore, mine, process, or deal in gold, silver, platinum,
diamonds, or other precious metals and minerals.
Retailing
12
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This sector consists of companies engaged in merchandising finished goods and
services primarily to individual consumers.
Software and Computer Services
Companies that make or sell software or information-based services, and
consulting, communications, and related services.
Technology
Companies that develop, produce or distribute products or services in the
computer, semi-conductor, electronics, communications, health care, and
biotechnology sectors.
Telecommunications
Companies that engage in the development, manufacturing, or sale of
communications services or communications equipment.
Transportation
This sector includes companies engaged in providing transportation services or
companies engaged in the design, manufacturing, distribution, or sale of
transportation equipment.
Utilities
This sector consists of companies in the public utilities industry and companies
deriving a majority of their revenues from public utility operations.
The Fund's Investment Policies
Securities and Investment Practices
The following discussion contains more detailed information about the types of
instruments the Fund will invest in, and certain strategies the Advisor may use
to achieve the Fund's investment objective. A complete listing of the Fund's
limitations and more detailed information about the Fund's investments are
contained in the Fund's SAI.
13
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Equity Securities. These securities include common stocks, ADRs, preferred
stocks, convertible securities, and warrants. Equity securities represent an
ownership interest in a company. Stock prices fluctuate based on changes in a
company's financial condition and on overall market conditions. The stocks of
smaller companies tend to be more sensitive to these factors. ADRs represent
equity in foreign companies. They are purchased and sold in the United States
securities markets in U.S. dollars.
Money Market Securities. These are high-quality, short-term instruments issued
by the U.S. Government, corporations, financial institutions, and other
entities. They may carry fixed, variable, or floating interest rates and may
include commercial paper, demand notes, certificates of deposit, banker's
acceptances, and time deposits.
Variable and Floating Rate Securities. These securities have interest rates that
are periodically adjusted either at specific intervals or whenever a benchmark
rate changes.
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 (Mutual Funds). The Fund may invest in other open or closed
end funds. The investment may not be more than 5% of the mutual fund's total
assets. If the Fund invests in other investment companies, Fund shareholders
would also pay, indirectly, the fees and expenses of such investment companies.
The Fund would use this strategy when the Advisor determines that this approach
is the most economical way to invest in a particular sector or to facilitate
investment in certain foreign countries.
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
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assets.
Temporary Strategies. The Advisor may hold cash and/or invest
all or a portion of the Fund's assets in money market instruments
or money market funds.
Portfolio Turnover. Portfolio turnover refers to the change in
investments held by the Fund. The Fund does not hold securities
for the long-term and may have higher than average portfolio
turnover.
The Management of the Fund
The Advisor
The Fund's Advisor is T.O. Richardson Company, Inc., Two Bridgewater Road,
Farmington, Connecticut 06032-2256. Under the Investment Advisory Agreement
between the Fund and the Advisor, the Fund pays the Advisor a fee at the annual
rate of 1.50% of the Fund's average daily net assets. The advisory fee is
accrued daily and paid monthly. While the Advisor has no prior experience
advising mutual funds, it has many years of experience in advising pooled
investment vehicles similar to mutual funds, such as bank common trust funds.
"Winning by Not Losing"(R) is the Advisor's approach to achieving superior long
term returns with consistent emphasis on capital preservation for risk averse
individuals, institutions, endowments and pension plans.
Portfolio Management Team
The Fund's portfolio management team is led by L. Austine Crowe,
Executive Vice President of the Advisor. For the past five
years, Mr. Crowe has actively managed private accounts for T.O.
Richardson using the Advisor's sector rotation discipline. Mr.
Crowe is the Chairman of the Advisor's investment
committee, which has responsibility for all of the Advisor's
investment decision making. The portfolio management team for
the Fund includes Samuel Bailey, Jr., Chairman of T.O.
Richardson, and Ralph L. Gaudet, Jr., Managing Director of T.O.
Richardson. Together the group has more than 60 years of
investment experience.
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Custodian, Transfer Agent and Dividend-Disbursing Agent and
Administrator
Firstar Bank Milwaukee, N.A. ("FBM"), Third Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202, acts as custodian of the Fund's assets (the
"Custodian"). Firstar Mutual Fund Services, LLC ("FMFS") Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202 serves as dividend-disbursing agent
(the "Dividend-Disbursing Agent") and as transfer agent for the Fund (the
"Transfer Agent"). Under a Fund Administration Servicing Agreement and a Fund
Accounting Servicing Agreement, FMFS also performs accounting and certain
compliance and tax reporting functions for the Fund.
Distributor
The Fund's distributor is T.O. Richardson Securities, Inc., (the "Distributor")
Two Bridgewater Road, Farmington, Connecticut 06032-2256. The Fund and the
Distributor have entered into a Distribution Agreement under which the
Distributor serves as the principal underwriter of the Fund, with responsibility
for promoting sales of Fund shares.
The Distributor does not receive any additional compensation from the Fund for
performing this function.
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The Distribution Agreement provides (A) that it will be subject to annual
approval by the Trustees and the Independent Trustees; (B) that it may be
terminated without penalty at any time by a vote of a majority of the
Independent Trustees or by vote of a majority of the outstanding securities of
the Fund on not more than 60 days' written notice; and (C) that it terminates if
it is assigned.
Fund Expenses
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The Fund is responsible for its own expenses, including: interest charges;
taxes; brokerage commissions; expenses of registering or qualifying shares for
sale with the states and the SEC; 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 Fund Shares are Priced
The price of the Fund's shares is based on its net asset value ("NAV"). The NAV
per share of the Fund is calculated once daily as of the close of trading
(generally 4:00 p.m. Eastern Time) every day that the New York Stock Exchange
("NYSE") is open for business. The NAV is calculated by taking the value of the
Fund's total assets, including interest or dividends accrued, less all
liabilities, and dividing the total by the total number of shares of the Fund
outstanding. The result is the Fund's NAV per share. In determining NAV,
expenses are accrued and applied daily and securities and other assets are
generally valued at market value.
Purchase orders for Fund shares or shares tendered for redemption prior to the
close of trading on a day the NYSE is open for trading will be valued as of the
close of trading on that day. Those received after the close of trading will be
valued as of the close of trading on the next day the NYSE is open.
Common stocks and other equity-type securities are valued at the last sales
price on the securities exchange on which they are usually traded. Under other
circumstances, securities are valued at the average of the most recent bid and
asked prices.
Fixed income securities are valued by pricing services that use electronic data
processing techniques to determine values. Under other circumstances, actual
sale or bid prices are used.
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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 Fund's
Trustees. The Board of Trustees may approve the use of pricing services to
assist the Fund in determining NAV.
Purchasing Shares of the Fund
Shares of the Fund may be purchased through the Distributor directly, or through
FMFS, the Fund's Transfer Agent. Shares of the Fund may also be purchased
through a registered broker-dealer, who may charge you a fee either at the time
of purchase or at the time of redemption. The fee, if charged, is retained by
the broker-dealer and is not sent to the Fund, the Advisor or the Distributor.
Shares of the Fund are sold on a continual basis at the next offering price (the
"Offering Price"), which is the NAV per share when the order is received by a
dealer, the Distributor or the Transfer Agent.
Payment for Fund shares should be made by check or money order. The minimum
initial investment is $5,000. For IRAs, the minimum investment is $2,000.
Subsequent investments of at least $500 may be made by mail or wire. If you use
the Automatic Investment Plan, 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.
To purchase Fund shares, complete the shareholder purchase application and mail
it with a check or money order payable to "T.O. Richardson Sector Rotation Fund"
to one of the addresses below. If you are making an additional purchase,
complete the Additional Investment Form provided on the lower portion of your
account statement and include it with your check or money order. To make an
additional purchase by wire, please refer to the " Wire Purchases" section that
follows.
For Regular Mail For Overnight Mail
- ----------------------------------------------------- --------------------
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- ----------------------------------------------------- --------------------
T.O. Richardson Sector T.O. Richardson Sector Rotation
Rotation Fund Fund
c/o Firstar c/o Firstar
Mutual Fund Services, LLC Mutual Fund
P.O. Box 701 Services, LLC
Milwaukee, Wisconsin Third Floor
53201-0701 615 East Michigan Street
Milwaukee, Wisconsin 53202
- ----------------------------------------------------- -------------------------
If the broker-dealer through which you choose to purchase Fund shares has not
entered into a sales agreement with the Distributor, the dealer can still place
your order for the purchase of Fund shares. Purchases made through dealers who
do not have selling agreements with the Advisor will be made at the Offering
Price, although they may charge a transaction fee. To avoid that fee, purchase
shares through a dealer that has entered into a sales agreement with the
Distributor or through the Transfer Agent.
If your check does not clear, you will be charged a $25 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 they are
accepted. The Fund reserves the right to decline or accept a purchase order
application.
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 Milwaukee, N.A.
- -------------------------------------------- ---------------------------------
ABA Number 075000022
- -------------------------------------------- ----------------------------------
Credit Firstar Mutual Fund
Services, LLC
- -------------------------------------------- -------------------------------
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- ------------------------------------------ -------------------------------
Account 112-952-137
- ------------------------------------------ -------------------------------------
Further Credit T.O. Richardson Sector Rotation Fund
- ------------------------------------------ -------------------------------------
Shareholder Account
Number
- -------------------------------------------- -----------------------------------
Shareholder Name
Account Registration
- -------------------------------------------- -----------------------------------
Please call 1-800-643-7477 prior to wiring any funds to notify the
Transfer Agent that the wire is coming. The Fund is not responsible for the
consequences of delays resulting from the banking or Federal Reserve wire system
or from incomplete wiring instructions.
Telephone Purchases
The telephone purchase option allows you to make subsequent investments
of at least $250 directly from a bank checking or savings account. To set up the
telephone purchase option on your account, complete the appropriate section in
the purchase 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
FMFS receives the application form. If FMFS receives both your purchase order
and payment by Electronic Funds Transfer through the ACH system before the close
of regular trading, you will pay the offering price calculated that day. Most
transfers are completed within one business day. Subsequent investments may be
made by calling 1-800-643-7477.
Automatic Investment Plan
The Automatic Investment Plan ("AIP") allows you to make regular
monthly investments in the Fund on the days you choose, directly from your bank
account. To establish the AIP, complete the appropriate section in the
shareholder application. You can
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set up the AIP with any financial institution that is a member of ACH. There is
no fee for this service, but if your ACH does not clear for lack of funds, you
will be charged a $25 service fee. The minimum initial investment for investors
using the AIP is $1,000, and subsequent investments must equal $100 or more.
The AIP allows investors to take advantage of dollar cost averaging,
which is simply investing a fixed amount of money at regular time periods, such
as monthly, or weekly. By making regular investments of the same dollar amount,
you can buy more shares when the price is low, and you will buy fewer shares
when the price is high. Over time, you may pay an average price for your Fund
shares, rather than buying at either a low point, or a high point. Of course,
the AIP program does not ensure a profit or protect against a loss under any
circumstances.
The Fund has the right to close an investor's account, if the investor
stops making payments under the AIP. Before closing an account, the Fund will
give the investor written notice and 60 days to reinstate the AIP, or reach the
regular minimum initial investment of $5,000.
Individual Retirement Accounts
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.
For Traditional and Roth IRAs, the maximum annual total IRA
contribution for one person is generally equal to the lower of $2,000 or 100% of
the investor's compensation (earned income). Investors may have both types of
IRAs, although the $2,000 annual maximum contribution will have to be spread
between the two accounts.
Traditional IRA
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Contributions to this IRA may be tax deductible when they are made,
depending on the investor's status as an "active participant" in an
employer-sponsored retirement plan and the investor's income. Distributions of
investment earnings from a Traditional IRA will be taxed at distribution.
Premature distributions taken before age 59-1/2 may be subject to an additional
10% tax. Distributions must begin by April 1 following the calendar year in
which the investor reaches age 70-1/2, or tax penalties may apply.
Roth IRA
Contributions to a Roth IRA are taxed when they are made, and
distributions from the IRA are not taxable, if investors hold the IRAs for
certain minimum periods of time (generally, until age 59-1/2). Investors whose
income exceeds certain limits are not eligible to contribute to a Roth IRA.
Distributions of investment earnings that do not meet the requirements for
tax-free withdrawal are subject to income taxes (and possibly penalty taxes).
There are no minimum required distributions except in the case of death of the
investor.
Simplified Employee Pension Plan
A Traditional IRA may also be used in conjunction with a Simplified
Employee Pension Plan, or SEP-IRA. A SEP-IRA is established by completing Form
5305-SEP and by opening a Traditional IRA for each eligible employee. SEP-IRAs
allow employers (including self-employed people) to purchase shares with tax
deductible contributions. These contributions may not exceed 15% of annual
compensation for any one participant in the SEP-IRA. 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
Employers and self-employed people may also establish SIMPLE IRAs.
SIMPLE IRAs are similar to Traditional IRAs, 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
23
<PAGE>
increases. Employers are required to contribute certain amounts to the
investor's SIMPLE IRA, either as a matching contribution to those participants
who make their own salary reduction contributions, or as a non-elective
contribution to all eligible participants, whether or not they make salary
reduction contributions.
A number of special rules apply to SIMPLE Plans, including:
o SIMPLE Plans generally are available only to employers with
fewer than 100 employees,
o Contributions must be made on behalf of all employees of the employer
(other than bargaining unit employees) who satisfy certain minimum
participation requirements,
o Contributions are made to a SIMPLE IRA that is separate and
apart from the other IRAs of employees,
o 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
o 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.
Redeeming Shares of the Fund
You may redeem (or sell back to the Fund) some or all of
your Fund shares at any time. Your redemption will be processed
24
<PAGE>
at the first NAV calculated after your complete request is received by FMFS. If
you have a broker or dealer listed on your account, you may redeem shares
through the broker or dealer. Otherwise, all redemption requests must be made
with FMFS. You can make redemption requests through any broker or dealer, but
you may be charged a fee. The Fund will mail you a check with your redemption
proceeds, generally the next business day after the request is processed, and
not more than seven days after receiving the complete request.
If you make a purchase by check, and then immediately request a
redemption, the Fund can hold your redemption payment until your original
purchase check has cleared, which could take up to 12 days.
The Transfer Agent may request additional documentation to process
redemptions from corporations, executors, administrators, trustees, guardians,
agents or attorneys-in-fact.
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.
If you are an IRA investor, you will need to indicate on your
redemption requests whether or not federal income tax should be withheld,
otherwise federal taxes will be withheld from your distribution.
Written Redemption
Simply mail a written request for redemption of your Fund shares to
either address below.
For Regular Mail For Overnight Mail
- --------------------------------------------- --------------------------------
T.O. Richardson Sector T.O. Richardson Sector Rotation
Rotation Fund Fundc/o Firstar
c/o Firstar Mutual Fund
Mutual Fund Services, LLC Services,
P.O. Box 701 LLC
Milwaukee, Wisconsin Third Floor
53201-0701 615 East Michigan Street
Milwaukee, Wisconsin 53202
- ----------------------------------------------------- -------------------------
Your request must:
o Be signed exactly as the shares are registered, including
the signature of each owner.
o Specify the number of shares or dollar amount to be
redeemed.
o Include a signature guarantee if your request is made within
15 days of a change of address.
You may request that the proceeds of your redemption be wired to the bank you
pre-authorized on your account application. FMFS charges a $12 service fee for
each wire transaction.
Because the U.S. Postal Service and other independent delivery services
are not agents of the Fund, mailing your request is not the same as having your
complete request received by the fund. Your request is "received" when it is
actually processed by the Transfer Agent.
Telephone Redemption
For redemption requests of $1,000 or more, you may call 1-800-643-7477.
In order to redeem shares by phone, you must have requested this option in
writing. Redemption proceeds will be mailed directly to you, or wired to the
bank account you designated on your account application. There is no charge for
this service. The Transfer Agent applies a $12.00 fee for all wire redemptions.
To change the designated bank account, send a written request with guaranteed
signature(s) to FMFS. To change your address, call FMFS at 1-800-643-7477, or
send a written request to the Transfer Agent.
Telephone redemption requests are not allowed within 15 days of an
address change, and the Fund may limit the number of telephone redemptions it
allows an investor to request. After they have been made, telephone redemptions
cannot be changed or canceled.
The Transfer Agent will try to be sure that all telephone redemption
requests are genuine. FMFS' procedures may include requiring personal
identification, taping telephone transactions, and sending written confirmation
of transactions
25
<PAGE>
to investors. As long as procedures similar to those above are followed, the
Fund and the Transfer Agent will not be liable for loss, cost, or expense
incurred by an investor for acting on telephone instructions, or for an
unauthorized telephone redemption. The Fund has the right to refuse a telephone
redemption request.
Systematic Withdrawal Plan
You may set up automatic withdrawals from your Fund account to a bank
account. To do this, you must have a balance of $10,000 in your account, and you
must withdraw at least $250 per payment. To set up the systematic withdrawal
plan ("SWP"), you need to fill out the appropriate section of the shareholder
application. You can choose to make withdrawals on a monthly, quarterly,
semi-annual or annual basis (or the following business day).
To change the amount or timing of withdrawal payments, or to
temporarily discontinue them, call 1-800-643-7477. Depending upon the size of
your account, the size of the withdrawal requests, and changes in the price of
shares of the Fund, you may run out of money in your account. If the dollar
amount in your account is not enough to make a payment, the amount will be
redeemed and the SWP will be terminated.
Signature Guarantees
Signature guarantees are required by the Transfer Agent to process some
types of transactions. Signature guarantees may be obtained from commercial
banks, savings associations, credit unions and brokerage firms. Please note that
a notary public stamp or seal is not the same thing as a signature guarantee.
Some types of transactions are:
o Redemption requests to be mailed or wired to a person
other than the registered owner(s) of the shares.
o Redemption requests to be mailed or wired to other than
the address currently on file.
o Any redemption request that occurs within 15 days of a
request for a change of address.
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Contingent Redemption Fee
The Fund is designed as a long-term investment and is not appropriate
for short-term trading. Frequent purchases, redemptions, and exchanges in and
out of the Fund make it difficult for the portfolio management team to make
long-term investment decisions, and can drive up the Fund's transaction costs.
To discourage short-term trading of Fund shares, the Fund charges a 1.25% fee on
redemptions of Fund shares that are held for less than one year. This contingent
redemption fee is waived for shareholders of the Fund who, immediately before
investing in the Fund, were private clients of the Advisor.
Redemption fees charged to investors will be paid to the Fund to help
offset transaction costs. The Fund will use the "first-in, first-out" accounting
method to calculate an investor's one-year holding period. This means that the
date of the redemption will be compared with the first purchase date of Fund
shares held in the account. If the period is less than one year, you will be
charged the redemption fee. As an example, if you purchase shares on January 1,
1999 and redeem them on or before December 31, 1999, you will pay the fee. If
you redeem the shares after January 1, 2000, you will not pay the fee.
The fee applies to shares held in all accounts, including, IRA
accounts, shares purchased through the Fund's automatic investment plan, and
shares held in broker omnibus accounts.
The Fund may close your account with at least 30 days notice if your
account balance falls below $250. In this case, the Fund will mail you a check
for the proceeds of the redemption within seven days of the redemption.
Exchanging Fund Shares for Shares of other Funds
Fund shareholders can exchange shares of the Fund for shares of the
Firstar Money Market Fund. Exchange requests are available for exchanges of
$1,000 or more. There is no charge for written exchange requests. FMFS will,
however, charge a $5 fee for each exchange transaction that is executed by
27
<PAGE>
telephone.
The Firstar Money Market Fund is a no-load money market fund managed by
an affiliate of FMFS, and is not related to the Fund. Before exchanging into the
Firstar Money Market Fund, please read the applicable prospectus, which may be
obtained by calling 1-800-643-7477.
For tax purposes, an exchange from the Fund to the Firstar Money Market
Fund is treated as an ordinary sale and purchase, and you will realize a capital
gain or loss. The Distributor may be paid by the Firstar Money Market Fund for
services provided to shareholders of the Fund.
Dividends, Capital Gains and Tax Treatment
All dividends and capital gains distributions will automatically be
reinvested in additional Fund shares at the current NAV unless you specifically
request that either dividends, or capital gains, or both, be paid in cash.
To change the way capital gains and dividends are paid to you, call
1-800-643-7477. You may choose to have dividends or capital gains that are paid
in cash sent by mail, or sent by electronic funds transfer ("EFT"). Transfers by
EFT generally take up to three business days to reach your bank account.
If you choose to receive distributions and dividends by check and the
post office cannot deliver the check, or if the check is not cashed for six
months, the Fund can reinvest that distribution, and any others, in your account
at the current net asset value.
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986. In this case, the Fund will
not have any tax liability.
The Fund intends to pay dividends and to distribute any capital gains
annually. Capital gains distributions may be more frequent. When the Fund
distributes a dividend or capital gain, the Fund's NAV decreases by the amount
of the payment. If you purchase shares right before a distribution, you will
have to pay income taxes on the distribution, even though the value of your
28
<PAGE>
investment has not changed.
Dividends and distributions of net realized short-term capital gains
are taxable to Fund investors as ordinary income. This is true whether they are
reinvested in the Fund or they are received in cash, unless you are either
exempt from taxes or qualify for a tax deferral.
Distributions of net realized long-term capital gains are taxable as a
capital gain, whether you reinvest them, or you receive them in cash. The
capital gain holding period is measured by the length of time the Fund has held
the securities that produced the gain, not the length of time you have held
shares in the Fund. The Fund provides information every year about the amount
and type of all dividends and capital gains paid during the prior year. You may
incur state or local taxes on dividends and capital gains.
If the Fund does not have 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 redemptions at a rate of 31%.
Other information about federal tax issues is in the SAI. There may be
other federal, state, or local tax considerations that apply to you. Be sure to
consult your own tax advisor.
The Year 2000 Issue
The Fund's operations depend on the seamless functioning of computer
systems in the financial service industry in general, and specifically on the
systems used by the Advisor and Firstar. The Year 2000 issue relates to computer
programs that use two digits rather than four to define calendar years. Computer
programs may recognize a two-digit reference to the year 2000 (00), as 1900
rather than 2000. This could result in system failures or miscalculations,
disrupting the processing of date-related information. These failures or
miscalculations could have a negative impact on the handling of security trades,
pricing and account services, as well as on the companies in which the Fund will
invest.
29
<PAGE>
The Advisor 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. There can be no
assurance, however, that such steps will be successful. The Advisor will also be
monitoring the steps being taken by Firstar, FMFS, and the Fund's other major
service providers to prepare their systems for the Year 2000 and expects that
each of them will be adapted before that date. There can be no guarantee,
however, that the service providers will be successful or that the steps taken
by the Advisor will be sufficient to avoid any adverse impact to the Fund.
Fund Investment Performance
The Fund may compare its investment results to other indices or other
mutual funds and use these 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.
Additional Information
30
<PAGE>
31
<PAGE>
Additional Information
TRUSTEES Samuel Bailey, Jr.
John R. Birk
Lloyd P. Griffiths
David B. H. Martin, Jr.
Robert T. Samuels
- ------------------------------ -----------------------------------------------
OFFICERS Samuel Bailey, Jr.,
President and Treasurer
Lloyd P. Griffiths, Vice President
L. Austine Crowe, Jr., Vice President
Kathleen M. Russo,
Secretary
Joseph C. Neuberger, Assistant Treasurer
Elaine E. Richards, Assistant Secretary
- ------------------------------ ----------------------------------------------
INVESTMENT T.O. Richardson Company, Inc.
ADVISOR Two Bridgewater Road
Farmington, CT 06032-2256
- ------------------------------ ----------------------------------------------
CUSTODIAN Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, Wisconsin 53202
- ------------------------------ -----------------------------------------------
ADMINISTRATOR For Regular Mail
AND TRANSFER T.O. Richardson Sector Rotation Fund
AGENT Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
For Overnight Mail T.O. Richardson Sector
Rotation Fund
Firstar Mutual Fund
Services, LLC
Third Floor
615 East Michigan Street Milwaukee, Wisconsin
53202-5207
- ------------------------------ -----------------------------------------------
32
<PAGE>
- ------------------------------ ----------------------------------------------
DISTRIBUTOR T.O. Richardson Securities, Inc.
Two Bridgewater Road
Farmington, CT 06032-2256
- ------------------------------ -----------------------------------------------
INDEPENDENT Arthur Andersen LLP
ACCOUNTANTS 100 East Wisconsin Avenue
P.O. Box 1215
Milwaukee, WI 53201-1215
- ------------------------------ -----------------------------------------------
Sullivan & Worcester LLP LEGAL COUNSEL 1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
- ------------------------------ -----------------------------------------------
More information on the Fund is available free upon request, including
the following:
Annual/Semiannual Report
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 and their effect
on the Fund's performance.
Statement of Additional Information
The SAI, dated December 22, 1998 provides more detailed information
about the Fund and its policies. A current SAI is on file with the
Securities and Exchange Commission ("Commission") and is incorporated
by reference (i.e. is legally considered part of this Prospectus).
To Request More Information or Ask Questions
Call 1-800-643-7477
- ------------------------------------ -------------------------------------------
Write T.O. Richardson Company, Inc.
Two Bridgewater Road
Farmington, Connecticut 06032-2256
- ------------------------------------ -----------------------------------------
33
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- ------------------------------------ -------------------------------------------
Internet Reports and other information about the Fund
are available on the Commission's website at
http://www.sec.gov. T.O. Richardson's web
site is http://www.torich.com.
- ------------------------------------ ------------------------------------------
Securities and Information about the Fund (including the
Exchange SAI) can be reviewed and copied at the
Commission Commission's Public Reference Room in
Washington, D.C. You may obtain information
about the operations of the Public Reference
Room by calling the Commission at
(1-800-SEC-0330). Copies of information
about the Fund may be obtained, upon payment
of a duplicating fee, by writing the
Commission's Public Reference Section,
Washington, D.C. 20549-6009.
- -------------------------------------------------------------------------------
SEC File Number is 811-8849.
34
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
T.O. RICHARDSON TRUST
T.O. Richardson Sector Rotation Fund
Two Bridgewater Road
Farmington, Connecticut
06032-2256
1-800-643-7477
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 December __, 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 December __, 1998
35
<PAGE>
TABLE OF CONTENTS
Page No.
THE FUND...........................................................
INVESTMENT STRATEGIES AND RISKS....................................
INVESTMENT RESTRICTIONS............................................
SECTOR DESCRIPTIONS AND RISKS......................................
TRUSTEES AND OFFICERS..............................................
PRINCIPAL SHAREHOLDERS.............................................
INVESTMENT ADVISOR.................................................
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............................................
36
<PAGE>
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 and the Prospectus dated December __, 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.
37
<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 ("SEC") as an open-end, diversified management investment company.
INVESTMENT STRATEGIES AND RISKS
The discussion below contains more detailed information about the types
of investments the Fund may make, the strategies the Advisor may employ in
pursuit of the Fund's investment objective, and a summary of related risks.
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
1
<PAGE>
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 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
2
<PAGE>
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. 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.
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,
3
<PAGE>
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
Advisor 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 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 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
4
<PAGE>
that are not subject to such restrictions.
American Depositary Receipts. American Depositary Receipts (ADRs) as
well other "hybrid" forms of ADRs, including European Depositary Receipts and
Global Depositary Receipts, 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. These 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.
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
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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 Advisor 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 or the
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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 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 Advisor.
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 Advisor. Such transactions may increase fluctuations in the
market value of Fund assets and may be viewed as a form of leverage.
Sources of Credit or Liquidity Support. The Advisor may rely on its
evaluation of the credit of a bank or other entity in determining whether to
purchase a security
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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 Advisor 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 Advisor 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. 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.
INVESTMENT RESTRICTIONS
The investment objective of the Fund is to seek capital appreciation
while also providing some protection against downmarkets. The Fund's investment
objective is nonfundamental and, as such, may be changed without shareholder
approval. Shareholders would be given 30 days' written notice prior to any such
change. In seeking to attain its investment objective, the Fund invests mainly
in equity securities of
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companies within particular sectors or groups of sectors. The Advisor allocates
assets among mainly equity securities of companies within particular sectors or
groups of sectors the Advisor determines have the greatest potential for market
appreciation. Assets are allocated to the different sectors according to the
Advisor'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 "More Information about
the Fund's 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 Securities Act of 1933, (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
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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 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 and the rules thereunder.
5. Make any loans, except through (i) purchases of debt securities or
other debt instruments, or (ii) engaging in repurchase agreements.
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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.
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 AND SECTOR RISKS
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
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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.
The description of the biotechnology sector will be interpreted broadly
by the Advisor, 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
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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 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
manufacturingr-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
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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 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
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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 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
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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.
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. Many of these companies are subject to
government regulation of their
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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
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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 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
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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 (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 Advisor, 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
19
<PAGE>
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.
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
20
<PAGE>
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 Advisor 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.
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.
21
<PAGE>
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
22
<PAGE>
communication fields including telephone, telegraph, satellite, microwave and
the provision of other communication facilities for the public benefit (not
including 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.
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 Principal Occupation(s)
Fund During Past Five Years
<S> <C> <C>
*Samuel Bailey, Jr. Trustee, President Chief Executive Officer
(58) and Treasurer and President of the
T.O. Richardson Company, Inc. Advisor
Two Bridgewater Road
Farmington, Connecticut 06032
23
<PAGE>
John R. Birk (45) Trustee September 1995 -
24649 Harbour View Drive Present, John R. Birk &
Ponte Vedra Beach, Florida Associates (business
32082 consulting); January 1995
to
September
1995,
President
of
Ideon
Group
(information
based
marketing
and
services
company);
August
1992
to
December
1994,
President,
Chief
Executive
Officer
and
Director
of
Wright
Express
Corporation
(information
processing
and
provider
of
credit
cards
to
fleet
operators);
January
1995
to
December
1995,
Chairman
of
Wright
Express;
January
1995
to
September
1995,
Chairman
of
National
Leisure
Group.
*Lloyd P. Griffiths (66) Trustee and Vice Executive Vice President,
T.O. Richardson Company, Inc. President the Advisor; Vice
Two Bridgewater Road President, the Distributor
Farmington, Connecticut 06032
David B.H. Martin (52) Trustee Partner, Hogan & Hartson
Hogan & Hartson L.L.P. L.L.P. (law firm)
555 13th Street, N.W.
Washington, D.C. 20004
24
<PAGE>
Robert T. Samuels (62) Trustee 1989 to June 1994,
433 South Main Street Partner, ABS
West Hartford, Connecticut Development Company
06110 (real estate development);
June 1994 - Present,
Principal, Balfour Venture
Capital Company
Kathleen M. Russo Secretary June 1998 - Present,
T.O. Richardson Company, Inc. Senior Vice President of
Two Bridgewater Road the Advisor; February
Farmington, Connecticut 06032 1991 - June 1998, Vice
President of Operations of
the Advisor.
</TABLE>
*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 Accrued From Fund and
as Part of Fund Fund Complex
Expenses
<S> <C> <C> <C>
Samuel Bailey, Jr. None None None
John R. Birk $2,000 None $2,000
Lloyd P. Griffiths None None None
David B.H. Martin None* None None
Robert T. Samuels $2,000 None $2,000
</TABLE>
*As a result of his law firm's policy on service as a
director, Mr. Martin is waiving his compensation as a Trustee.
25
<PAGE>
As of the date of this Prospectus, except for the ownership interest
described below, 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 Advisor do not receive any remuneration from the Fund for
serving as Trustees or officers.
PRINCIPAL SHAREHOLDERS
As of the date of this Prospectus, L. Austine Crowe, Executive Vice
President of the Adviser and Vice President of the Distributor owned all of the
initial shares of the Trust. This
controlling interest could affect the outcome of proxy voting or the direction
of management of the Trust. As the Trust issues shares to the public, Mr.
Crowe's percentage ownership will decline.
INVESTMENT ADVISOR
The Advisor is the investment advisor to the Fund. The Advisor is
controlled by several of its officers. The Advisor's address is Two Bridgewater
Road, Farmington, Connecticut 06032-2256.
The investment advisory agreement between the Fund and the Advisor
dated as of December 21, 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
26
<PAGE>
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 October
19, 1998 and by the initial shareholder of the Fund on December 21, 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 Advisor, and will terminate
automatically in the event of its assignment.
Under the terms of the Advisory Agreement, the Advisor manages the
Fund's investments and business affairs, subject to the supervision of the
Trust's Board of Trustees. At its expense, the Advisor 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
Advisor an annual management fee of 1.50% of its average daily net assets. The
advisory fee is accrued daily and paid monthly.
DISTRIBUTOR
Distributor
Under a distribution agreement dated as of December 21, 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 Advisor, is located at the same address as the Advisor. 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. The following directors, officers or employees of the Advisor are also
directors, officers or employees of the Distributor: Samuel Bailey, Jr., Lloyd
P. Griffiths, L. Austine Crowe, and Kathleen M. Russo.
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Advisor, 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 Advisor seeks to obtain the best execution at the best
security price available with respect to each transaction. The best price to the
Fund means the best net price
27
<PAGE>
without regard to the mix between the purchase or sale price and commission, if
any. While the Advisor 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 advisor, such as the Advisor, 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 Advisor 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 Advisor 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
Advisor 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
Advisor 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 Advisor'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 Advisor, the total commissions paid by the
Fund will be reasonable in relation to the benefits to the Fund over the long
term.
The Advisor places portfolio transactions for other advisory accounts
the Advisor manages. Research services furnished by firms through which the
28
<PAGE>
Fund effects its securities transactions may be used by the Advisor in servicing
all of its accounts; not all of such services may be used by the Advisor in
connection with the Fund. The Advisor believes it is not possible to measure
separately the benefits from research services to each of the accounts the
Advisor 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 Advisor believes such costs to the
Fund will not be disproportionate to the benefits received by the Fund on a
continuing basis. The Advisor 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 Advisor 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.
29
<PAGE>
30
<PAGE>
FUND ADMINISTRATOR
The Board of Trustees of the Trust has approved a Fund Administration
Servicing Agreement between the Trust and Firstar Mutual Fund Services, LLC
("FMFS") pursuant to which FMFS serves as administrator of the Fund. The
administrative services supplied by FMFS include general Fund management
(excluding investment advisory services), compliance with federal and state
laws, financial reporting and tax reporting. The address of FMFS is 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 Bank Milwaukee ("FBM") as custodian of the Fund. As
custodian, of the Fund's assets, FBM 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.
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
FMFS also acts as transfer agent and dividend-disbursing agent for the
Fund. FMFS is compensated based on an annual fee per open account of [ $16]
subject to a minimum annual fee of $15,000 plus out-of-pocket expenses, such as
postage and printing expenses in connection with shareholder communications.
FMFS also receives an annual fee per closed account of [ $16].
TAXES
31
<PAGE>
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 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, 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 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 Fund, 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
32
<PAGE>
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 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.
33
<PAGE>
PERFORMANCE INFORMATION
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.
Average Annual 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
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the stated periods at the end of the
stated periods.
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.
34
<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, 100 East Wisconsin Avenue, P.O. Box 1215,
Milwaukee, Wisconsin, 53201-1215, independent accountants for the Fund, audit
and report on the Fund's financial statements.
35
<PAGE>
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, NW, 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 Advisor and the Distributor.
FINANCIAL STATEMENTS
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
36
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of the T.O. Richardson Sector Rotation Fund:
We have audited the statement of assets and liabilities of the T.O. Richardson
Sector Rotation Fund (the "Fund," a Massachusetts corporation) as of December
18, 1998. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provided a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the net assets of the T.O. Richardson
Sector Rotation Fund as of December 18, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
December 21, 1998.
37
<PAGE>
T.O. Richardson Sector Rotation Fund
Statement of Assets and Liabilities
December 18, 1998
ASSETS
Cash $110,000
Prepaid registration fees 24,680
Prepaid insurance 19,346
=============
Total
Assets 154,026
=============
LIABILITIES
Payable to Advisor 31,656
Other Accrued
Expenses 12,370
=============
Total Liabilities 44,026
=============
NET ASSETS $110,000
=============
Capital Shares, $0.001 par value,
unlimited shares authorized 11,000
=============
Net asset value, offering and
redemption price per share
(net assets/shares outstanding) $10.00
=============
See accompanying notes to the financial statements.
38
<PAGE>
T.O. Richardson Sector Rotation Fund
Notes to the Financial Statements
As of December 18, 1998
1. Organization
The T.O. Richardson Sector Rotation Fund (the "Fund") is a series of
the T.O. Richardson Trust (the "Trust"), a voluntary business
associaton organized on June 2, 1998 in the Commonwealth of
Massachusetts, and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end diversified
management investment company. The Fund is currently the only series of
the Trust. The Fund has had no operations other than those relating to
organizational matters, including the sale of 11,000 shares for cash in
the amount of $110,000, which were sold to T.O. Richardson Company,
Inc. (the "Advisor"), on December 18, 1998.
2. Significant Accounting Policies
(a) Organization and Prepaid Registration Expenses Organization Costs
incurred by the Trust in connection with the organization of the Fund,
in the amount of $86,722, were assumed by the Advisor. The Fund will
not be required to reimburse the Advisor for the organization costs.
Prepaid registration expenses incurred by the Trust in connection with
the initial public offering of shares and prepaid insurance costs were
advanced by the Advisor, subject to potential recovery from the Fund
(see Note 3). Prepaid registration expenses and prepaid insurance
costs are deferred and amortized over the period of benefit.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated
investment company and to make the requisite distributions of
income and capital gains to its shareholders sufficient to
relieve it from all or substantially all Federal income
taxes.
(c) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and use assumptions that affect the
reported amounts of assets and
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liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
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3. Investment Advisor
The Trust has an Investment Advisory Agreement (the "Agreement") with
the Advisor, with whom certain officers and Trustees of the Trust are
affiliated, to furnish investment advisory services to the Fund. Under
the terms of the Agreement, the Trust, on behalf of the Fund,
compensates the Advisor for its management services at the annual rate
of 1.50% of the Fund's average daily net assets.
The Advisor has agreed to voluntarily waive its management fee and/or
reimburse the Fund's other expenses to the extent necessary to ensure
that the Fund's operating expenses do not exceed 1.95% of its average
daily net assets. Any such waiver or reimbursement is subject to later
adjustment to allow the Advisor to recoup amounts waived or reimbursed
to the extent actual fees and expenses for a period are less than the
expense limitation caps, provided, however, that the Advisor shall only
be entitled to recoup such amounts for a period of three years from the
date such amount was waived or reimbursed.
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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) Investment Advisory Agreement with T.O.
Richardson Company, Inc.
(5.1) Distribution Agreement with T.O. Richardson Securities, Inc.
(5.2) Form of Dealer Agreement
(6) None
(7) Custodian Agreement with Firstar Bank
Milwaukee, N.A. Trust Company
(8.1) Transfer Agency Agreement with Firstar
Mutual Fund Services, LLC
(8.2) Administration Agreement with Firstar
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Mutual Fund Services, LLC
(8.3) Fund Accounting Agreement with Firstar
Mutual Fund Services, LLC
(8.4) Fulfillment Servicing Agreement with Firstar
Mutual Fund Services, LLC
(8.5) Consent to Use of Name by Registrant with
T.O. Richardson Company, Inc.
(8.6) Consents of Trustees
(8.7) Powers of Attorney
(9) Opinion and Consent of Sullivan & Worcester LLP
(10) Consent of Arthur Andersen LLP
(11) None
(12) Subscription Agreement
(13) Individual Retirement Account Disclosure Statement
and Custodial Account
(14) None
(15) None
(16) None
- -----------------
*Incorporated by reference to Registration Statement on Form N-1A filed with the
Commission on June 30, 1998.
Item 24. Persons Controlled by or under Common Control with Registrant
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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 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
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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
Advisor
Besides serving as investment advisor to private accounts, the
Advisor 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 Advisor's directors and officers is hereby
incorporated by reference from the information contained under "
Trustees and Officers" in the SAI.
Item 27. Principal Underwriter
(a) T.O. Richardson Securities, Inc. (" TORS") serves as
Registrant's Distributor. In addition to serving as
principal underwriter for Registrant, TORS also
serves as principal underwriter for the following
investment companies: Barrett Funds and the Simms
Funds.
(b) The principal business address of TORS is Two
Bridgewater Road, Farmington, Connecticut 06032-2256.
The following information relates to each director
and officer of TORS:
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<TABLE>
<CAPTION>
Positions and Offices Positions and Offices with
Name With Underwriter Registrant
<S> <C> <C> <C>
Samuel Bailey, Jr. President and Chief Trustee, President and Treasurer
Executive Officer
Lloyd P. Griffiths Vice President Trustee and Vice
President
L. Austine Crowe Vice President Vice President
Kathleen M. Russo Secretary Secretary
</TABLE>
Item 28. Location of Accounts and Records
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 advisor, at Registrant's corporate offices, Two
Bridgewater Road, Farmington, Connecticut 06032, except records held and
maintained by Firstar Mutual Fund Services LLC, Third Floor, 615 E. Michigan
Street, Milwaukee, Wisconsin 53202, relating to its function as transfer agent,
administrator, and fund accountant or by Firstar Bank Milwaukee, N.A., relating
to its function as custodian.
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.
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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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Pre-
Effective Amendment No. 2 to its 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 21st day of December 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 Pre-Effective Amendment No. 2 to the Registration Statement on Form N- 1A
has been signed below by the following persons in the capacities and on the date
indicated.
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<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C> <C>
/s/Samuel Bailey, Jr.
- --------------------------- Trustee, President and Treasurer December 21,
Samuel Bailey, Jr. 1998
* Trustee
John R. Birk
* Trustee and Vice President
Lloyd P. Griffiths
* Trustee
David B.H. Martin
* Trustee
Robert T. Samuels
/s/David M. Leahy Attorney-in-Fact for each of the December 21
- --------------------------- above-indicated Trustees , 1998
David M. Leahy
</TABLE>
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EXHIBIT INDEX
Exhibit No. Exhibit
(1) Registrant's Declaration of Trust*
(2) Registrant's By-Laws*
(3) None
(4) Investment Advisory Agreement with T.O. Richardson
Company, Inc.
(5.1) Distribution Agreement with T.O. Richardson
Securities, Inc.
(5.2) Form of Dealer Agreement
(6) None
(7) Custodian Agreement with Firstar Bank
Milwaukee, N.A.
(8.1) Transfer Agency Agreement with Firstar
Mutual Fund Services, LLC
(8.2) Administration Agreement with Firstar
Mutual Fund Services, LLC
(8.3) Fund Accounting Agreement with Firstar
Mutual Fund Services, LLC
(8.4) Fulfillment Servicing Agreement with Firstar
Mutual Fund Services, LLC
(8.5) Consent to Use of Name by Registrant with T.O.
50
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Richardson Company, Inc.
(8.6) Consents of Trustees
(8.7) Powers of Attorney
(9) Opinion and Consent of Sullivan & Worcester LLP
(10) Consent of Arthur Andersen LLP
(11) None
(12) Subscription Agreement
(13) Individual Retirement Account Disclosure Statement and Custodial
Account
(14) None
(15) None
(16) None
- -----------------
*Incorporated by reference from the Registration Statement on Form N-1A filed
with the Commission on June 30, 1998.
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INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 21st day of December 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 Mutual Fund Services, LLC, 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
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Officers and Trustees concerning the Advisor's discharge of
the foregoing responsibilities.
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
expenses, 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 1 and 2 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
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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.
The Advisor voluntarily may reduce any portion of the
compensation or reimbursement of expenses due to it pursuant
to this Agreement and may agree to make payments to limit the
expenses which are the responsibility of a Fund under this
Agreement. Any such reduction or payment shall be applicable
only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or
reimbursement due to the Advisor hereunder or to continue
future payments. Any such reduction will be agreed upon prior
to accrual of the related expense or fee and will be estimated
daily. Any fee withheld shall be voluntarily reduced and any
Fund expense paid by the Advisor voluntarily or pursuant to an
agreed expense limitation shall be reimbursed by the
appropriate Fund to the Advisor in the first, second or third
(or any combination thereof) fiscal year next succeeding
fiscal year, second succeeding fiscal year or third succeeding
fiscal year do not exceed any limitation to which the Advisor
has agreed. Such reimbursement may be paid prior to the Fund's
payment of current expenses if so requested by the Advisor
even if such payment may require the Advisor to waive or
reduce its fees hereunder to pay current Fund expenses.
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
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.
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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 unsuitable, impractical or
undesirable for the Trust or does not comply with the terms
and
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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.
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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
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
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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 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, at and if to 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
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<PAGE>
by courier server or 3 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 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: /s/ Samuel Bailey, Jr.
- ---------------------------------------
Samuel Bailey, Jr.
T.O. RICHARDSON COMPANY, INC.
By: /s/ Samuel Bailey, Jr.
- ---------------------------------------
Samuel Bailey, Jr.
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<PAGE>
FEE SCHEDULE
Fund Fee
T.O. Richardson Sector Rotation 1.50% of the Fund's average daily net
Fund assets. The fee is accrued daily and
payable monthly.
-9-
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DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of December 21, 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.
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<PAGE>
(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.
(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.
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<PAGE>
(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 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
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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 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. TORS shall receive no compensation for the services
performed and the expenses assumed by it under 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
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<PAGE>
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, 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
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<PAGE>
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 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.
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18. Notice. The name T.O. Richardson Trust is the designation of the
Trustees under the Declaration of 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. The obligations of the Trust 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 Trust, but
the Trust's property only shall be bound.
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<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.
T. O. RICHARDSON TRUST
By: /s/ Samuel Bailey, Jr.
---------------------------------------
Samuel Bailey, Jr.
T. O. RICHARDSON SECURITIES, INC.
By: /s/ Samuel Bailey, Jr.
---------------------------------------
Samuel Bailey, Jr.
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<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: December 21, 1998
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<PAGE>
T.O. RICHARDSON TRUST
Two Bridgewater Road
Farmington, Connecticut 06032
Dealer's Agreement
T.O. Richardson Securities, Inc. ("Underwriter") invites you, as
a selected dealer, to participate as principal in the distribution of
shares (the "Shares") of the T.O. Richardson Sector Rotation Fund (the
"Fund"), of which it is the exclusive underwriter. Underwriter agrees
to sell to you, subject to any limitations imposed by the Fund, Shares
issued by the Fund and to promptly confirm each sale to you. All sales
will be made according to the following terms:
1. All offerings of any of the Shares by you must be made at the
public offering prices, and shall be subject to the conditions of
offering, set forth in the then current prospectus of the Fund (the
"Prospectus") and to the terms and conditions herein set forth, and
you agree to comply with all requirements applicable to you of all
applicable laws, including federal and state securities laws, the
rules and regulations of the Securities and Exchange Commission, and
the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (the "NASD"), including Section 24 of the Rules of Fair
Practice of the NASD. You will not offer the Shares for sale in any
state or other jurisdiction where they are not qualified for sale
under the Blue Sky Laws and regulations of such state or jurisdiction,
or where you are not qualified to act as a dealer. Upon application to
Underwriter, Underwriter will inform you as to the states or other
jurisdictions in which Underwriter believes the Shares may legally be
sold.
2. You hereby authorize Underwriter to act as your agent in connection with
all transactions in open accounts in which you are designated as Dealer of
Record. All designations as Dealer of Record, and all authorizations of
Underwriter to act as your Agent pursuant thereto, shall cease upon the
termination of this Agreement or upon the investor's instructions to transfer
his open account to another Dealer of Record.
3. Underwriter reserves the right to cancel this Agreement at any time
without notice if any Shares shall be offered for sale by you at less than the
then current public offering prices determined by, or for, the Fund.
4. All orders are subject to acceptance or rejection by Underwriter in
its sole discretion. The Underwriter reserves the right, in its discretion,
without notice, to suspend sales or withdraw the offering of Shares entirely.
5. Payment shall be made to the Fund and shall be received by its
Transfer Agent within three (3) business days after the acceptance of your order
or such shorter time as may be required by law. With respect to all Shares
ordered by you for which payment has not been received, you hereby assign and
pledge to Underwriter all of your right, title and interest in such Shares to
secure payment therefor. You appoint Underwriter as your agent to execute and
deliver all documents necessary to effectuate
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<PAGE>
any of the transactions described in this paragraph. If such payment is not
received within the required time period, Underwriter reserves the right,
without notice, and at its option, forthwith (a) to cancel the sale, (b) to sell
the Shares ordered by you back to the Fund, or (c) to assign your payment
obligation, accompanied by all pledged Shares, to any person. You agree that
Underwriter may hold you responsible for any loss, including loss of profit,
suffered by the Fund, its Transfer Agent or Underwriter, resulting from your
failure to make payment within the required time period.
6. No person is authorized to make any representations concerning
Shares of the Fund except those contained in the current applicable Prospectus
and Statement of Additional Information and in sales literature issued and
furnished by Underwriter supplemental to such Prospectus. Underwriter will
furnish additional copies of the current Prospectus and Statement of Additional
Information and such sales literature and other releases and information issued
by Underwriter in reasonable quantities upon request.
7. Under this Agreement, you act as principal and are not employed by
Underwriter as broker, agent or employee. You are not authorized to act for
Underwriter nor to make any representation on its behalf; and in purchasing or
selling Shares hereunder, you rely only upon the current Prospectus and
Statement of Additional Information furnished to you by Underwriter from time to
time and upon such written representations as may hereafter be made by
Underwriter to you over its signature.
8. You appoint the transfer agent for the Fund as your agent to execute
the purchase transactions of Shares in accordance with the terms and provisions
of any account, program, plan or service established or used by your customers
and to confirm each purchase to your customers on your behalf, and you guarantee
the legal capacity of your customers purchasing such Shares and any co-owners of
such Shares.
9. You will (a) maintain all records required by laws relating to
transactions in the Shares, and upon the request of Underwriter, or the request
of the Fund, promptly make such records available to Underwriter or to the Fund
as are requested, and (b) promptly notify Underwriter if you experience any
difficulty in maintaining the records required in the foregoing clause in an
accurate and complete manner. In addition, you will establish appropriate
procedures and reporting forms and schedules, approved by Underwriter and by the
Fund, to enable the parties hereto and the Fund to identify all accounts opened
and maintained by your customers.
10. Each party hereto represents that it is presently, and, at all
times during the term of this Agreement, will be, a member in good standing of
the NASD and agrees to abide by all of its Rules of Fair Practice including, but
not limited to, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so
as to profit yourself as a result of such withholding. You shall not purchase
any Shares from Underwriter other than for investment, except for the purpose of
covering purchase orders already received.
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<PAGE>
(b) All conditional orders received by Underwriter must be at a
specified definitive price.
(c) Neither Underwriter, as exclusive underwriter for the Fund, nor you
as principal, shall purchase any Shares from a record holder at a price lower
than the net asset value then quoted by, or for, the Fund. Nothing in this
sub-paragraph shall prevent you from selling Shares for the account of a record
holder to Underwriter or the Fund ta the net asset value currently quoted by, or
for, the Fund and charging the investor a fair commission for handling the
transaction.
(d) You warrant on behalf of yourself and your registered
representatives and employees that any purchase of Shares at net asset value by
the same pursuant to the terms of the Prospectus of the Fund is for investment
purposes only and not for purposes of resale. Shares so purchased may be resold
only to the Fund.
11. You agree that you will indemnify Underwriter, the Fund, the Fund's
transfer agent, the Fund's investment advisor, and the Fund's custodian and hold
such persons harmless from any claims or assertions relating to the lawfulness
of your participation in this Agreement and the transactions contemplated hereby
or relating to any activities of any persons or entities affiliated with you
which are performed in connection with the discharge of your responsibilities
under this Agreement. If any such claims are asserted, the indemnified parties
shall have the right to engage in their own defense, including the selection and
engagement of legal counsel of their choosing, and all costs of such defense
shall be borne by you.
12. This Agreement will automatically terminate in the event of its
assignment. Either party hereto may cancel this Agreement without penalty upon
ten days' written notice. This Agreement may also be terminated at any time
without penalty by the vote of a majority of the members of the Board of
Trustees of the Fund who are not "interested persons" (as such term is defined
in the Investment Company Act of 1940), or by a vote of a majority of the
outstanding voting securities of the Fund on ten days' written notice.
13. All communications to Underwriter should be sent to T.O. Richardson
Securities, Inc., Two Bridgewater Road, Farmington, Connecticut 06032, or at
such other addresses as Underwriter may designate in writing. Any notice to you
shall be duly given if mailed or telegraphed to you at the address of your
principal office, as indicated below in your acceptance of this Agreement.
14. This Agreement supersedes any other agreement with you relating to
the offer and sale of the Shares, and relating to any other matter discussed
herein.
15. This Agreement shall be binding (i) upon placing your first order
with Underwriter for the purchase of Shares, or (ii) upon receipt by Underwriter
in Farmington, Connecticut of a counterpart of this Agreement duly accepted and
signed by you,
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<PAGE>
whichever shall occur first. This Agreement shall be construed in
accordance with the laws of the State of Connecticut.
16. The undersigned, executing this Agreement on behalf of Dealer,
hereby warrants and represents that he is duly authorized to so execute this
Agreement on behalf of Dealer.
17. The name T.O. Richardson Trust is the designation of the Trustees
under the Declaration of 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. The obligations of the Trust 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 Trust, but the
Trust's property only shall be bound.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return one copy of this Agreement to the Underwriter.
ACCEPTED BY DEALER T.O. RICHARDSON SECURITIES, INC.
By: ____________________________ By: _____________________________
Authorized Signature, Position
--------------------------------
_______________________________ Date
Type or Print Name
- -------------------------------
Dealer Name
- -------------------------------
Address
- -------------------------------
Phone
- -------------------------------
Date
By: _____________________________
- --------------------------------
Date
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<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT made as of December 21, 1998, between T.O. Richardson
Trust, a Massachusetts business trust (hereinafter called the ("Trust"), and
FIRSTAR BANK MILWAUKEE, 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:
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<PAGE>
(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;
(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
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<PAGE>
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; (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
-3-
<PAGE>
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 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
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<PAGE>
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.
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
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<PAGE>
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 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.
16. Notice
The name T.O. Richardson Trust is the designation of the Trustees under
the Declaration of 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. The obligations of the Trust 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 Trust, but the
Trust's property only shall be bound.
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<PAGE>
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.
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Joe D. Redwine
---------------------------------------
Joe D. Redwine
T.O. RICHARDSON TRUST
By: /s/ Samuel Bailey, Jr.
---------------------------------------
Samuel Bailey, Jr.
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<PAGE>
Mutual Fund Custodial Agent Service
Domestic Portfolios
Annual Fee Schedule
o T.O. Richardson Company
o Annual fee based on market value of assets:
o $0.20 per $1,000 (2.0 basis points)
o Minimum annual fee per fund: $443,750
o Investment transactions: (purchase, sale, exchange, tender, redemption,
maturity, receipt delivery)
o $12.00 per book entry security (depository or Federal Reserve system)
o $25.00 per definitive security (physical)
o $75.00 per Euoclear
o $ 8.00 per principal reduction on pass-through certificates
o $35.00 per option/future contracts
o Variable Amount Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge,
which is 1/4 of 1%, is deducted from the variable amount note income at
the time is credited to your account.
o Extraordinary expenses: Based on time and complexity involved
o Out-of-pocket expenses: Charged to the account, including but not limited
to:
o $10.00 per variation margin transaction
o $10.00 per Fed wire deposit or withdrawal
o Fees are billed monthly, based on market value at the beginning of the
month.
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<PAGE>
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this 21 day of December,
1998, by and between T.O. Richardson Trust (hereinafter referred to as the
"Trust") and Firstar Mutual Fund Services, LLC, a limited liability company
organized under the laws of the State of Wisconsin (hereinafter referred to as
the "Agent").
WHEREAS, the Trust is an open-end management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in
the business of administering transfer and dividend disbursing agent functions
for the benefit of its customers;
NOW, THEREFORE, the Trust and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery
where appropriate, of payment and supporting documentation to the
Trust's custodian;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Trust's
custodian;
D. Pay monies upon receipt from the Trust's custodian, where
relevant in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
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<PAGE>
G. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Trust;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e.,systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Trust and maintain,
pursuant to Securities Exchange Act of 1934 Rule 17ad-10(e), a
record of the total number of shares of the Trust which are
authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and
prepare and mail confirmations and statements of account to
shareholders for all purchases, redemptions and other
confirmable transactions as agreed upon with the Trust; and
O. Provide a Blue Sky System which will enable the Trust to
monitor the total number of shares sold in each state. In
addition, the Trust shall identify to the Agent in writing
those transactions and assets to be treated as exempt from the
Blue Sky reporting to the Trust for each state. The
responsibility of the Agent for the Trust's Blue Sky state
registration status is solely limited to the initial
compliance by the Trust and the reporting of such transactions
to the Trust.
2. Compensation
The Trust agrees to pay the Agent for performance of the duties listed
in this Agreement; the fees and out-of-pocket expenses include, but are not
limited to the following: printing, postage, forms, stationery, record
retention, mailing, insertion, programming, labels, shareholder lists and proxy
expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Trust and the Agent.
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<PAGE>
The Trust agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
3. Representations of Agent
The Agent represents and warrants to the Trust that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities Exchange
Act of 1934, as amended;
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to
authorize it to enter and perform this Agreement;
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement; and
G. It will comply with all applicable requirements of the
Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, the Investment Company Act
of 1940, as amended, and any laws, rules, and regulations of
governmental authorities having jurisdiction.
4. Representations of the Trust
The Trust represents and warrants to the Agent that:
A. The Trust is an open-end diversified investment company under the
Investment Company Act of 1940;
B. The Trust is a business trust organized, existing, and in good
standing under the laws of Massachusetts;
C. The Trust is empowered under applicable laws and by its
Declaration of Trust and bylaws to enter into and perform this
Agreement;
D. All necessary proceedings required by the Declaration of Trust
have been taken to authorize it to enter into and perform this
Agreement;
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<PAGE>
E. The Trust will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws,
rules and regulations of government authorities having
jurisdiction; and
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue
to be made, with respect to all shares of the Trust being
offered for sale.
5. Covenants of Trust and Agent
The Trust shall furnish the Agent a certified copy of the resolutions
of the Board of Trustees of the Trust authorizing the appointment of the Agent
and the execution of this Agreement. The Trust shall provide to the Agent a copy
of the Declaration of Trust, Bylaws of the Trust, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Trust and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Trust on and in accordance with its/their request.
6. Indemnification; Remedies Upon Breach
The Agent shall exercise reasonable care in the performance of its
duties under this Agreement. The Agent 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
the Agent's control, except a loss resulting from the Agent'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 the Agent 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 the Agent may sustain or incur or which may be asserted against the Agent
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
the Agent by any duly authorized officer of the Trust, such duly authorized
officer to be included in a list of authorized officers furnished to the Agent
and as amended from time to time in writing by resolution of the Board of
Trustees of the Trust.
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<PAGE>
Further, the Trust will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit as a result of the negligence of the Trust or the principal underwriter
(unless contributed to by the Agent's breach of this Agreement or other
Agreements between the Trust and the Agent, or the Agent's own negligence or bad
faith); or as a result of the Agent acting upon telephone instructions relating
to the exchange or redemption of shares received by the Agent and reasonably
believed by the Agent under a standard of care customarily used in the industry
to have originated from the record owner of the subject shares; or as a result
of acting in reliance upon any genuine instrument or stock certificate signed,
countersigned, or executed by any person or persons authorized to sign,
countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent 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 the Agent. The Agent 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 Fund
shall be entitled to inspect the Agent's premises and operating capabilities at
any time during regular business hours of the Agent, upon reasonable notice to
the Agent.
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
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 the Agent 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 Agent 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 the Agent against any claim which may
be the subject of this indemnification. In the event that the Trust so elects,
it will so notify the Agent and thereupon the Trust shall take over complete
defense of the claim, and the Agent shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
section. The Agent shall in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify the Agent except with the
Trust's prior written consent.
The Agent 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
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<PAGE>
to be taken by the Agent as a result of the Agent's refusal or failure to comply
with the terms of this Agreement, its bad faith, negligence, or willful
misconduct.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Trust and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld and may not be withheld where the Agent may be exposed
to civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
Additional Series. The 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.
8. Records
The Agent 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 of 1940 as amended (the "Investment Company Act"),
and the rules thereunder. The Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
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.
9. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of Wisconsin.
10. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of
the parties.
B. This Agreement may be terminated upon ninety (90) days'
written notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not
be assigned by either party without the signed, written
consent of the other party.
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<PAGE>
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered, or
mailed to the principal place of business of the other party. If to the
Agent, such notice should be sent to Firstar Trust Company Mutual Fund
Services, 615 East Michigan Street, Milwaukee, WI 53202. If to the Trust,
such notice should be sent to T.O. Richardson Trust, Two Bridgewater Road,
Farmington, CT 06032, Attention: Samuel Bailey, Jr., President.
E. In the event that the Trust gives to the Agent its written
intention to terminate and appoint a successor transfer agent,
the Agent agrees to cooperate in the transfer of its duties
and responsibilities to the successor, including any and all
relevant books, records and other data established or
maintained by the Agent under this Agreement.
F. Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records
and material will be paid by the Trust.
11. Notice
The name T.O. Richardson Trust is the designation of the Trustees under
the Declaration of 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. The obligations of the Trust 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 Trust, but the
Trust's property only shall be bound.
T.O. Richardson Trust Firstar Mutual Fund Services, LLC
By: /s/ Samuel Bailey, Jr. By: /s/ Joe D. Redwine
- --------------------------------------- -----------------------------------
Samuel Bailey, Jr. Joe D. Redwine
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<PAGE>
Shareholder Fees
(Charged to Investors)
<TABLE>
<CAPTION>
Defined
Contribution
403(b)(7), 401(k)
IRA Accounts Plan Accounts
<S> <C> <C>
I. Qualified Plan Fees $12.50 $12.50
Annual maintenance fee per account 15.00 15.00
Transfer to successor trustee 15.00 15.00
Distribution to a participant (exclusive
of systematic withdrawal plans) 15.00 15.00
Refund of excess contribution 15.00 15.00
II. Additional Shareholder fees Amount
Any outgoing wire $ 12.00/wire
Telephone exchange $ 5.00/telephone exchange
Return check fee $ 20.00/return check
Stop payment fee (liquidation,
dividend, draft check) $ 20.00/stop payment
Research fee $ 5.00/research item
(For requested items of the second
calendar year [or previous] to the
request)
</TABLE>
These fees are subject to change upon
notification by Firstar Mutual Fund Services, LLC to
the Mutual Fund client.
-8-
<PAGE>
FUND ADMINISTRATION SERVICING AGREEMENT
This agreement is made and entered into on this 21, day of December 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 Mutual Fund
Services, LLC, a limited liability company organized under the laws of the State
of Wisconsin (hereinafter referred to as "FMFS").
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, FMFS 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 FMFS do mutually promise and agree as follows:
I. Appointment of Administrator
The Trust hereby appoints FMFS as Administrator of the Trust on the
terms and conditions set forth in this Agreement, and FMFS 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.
FMFS 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 FMFS
A. General Trust Management
1
<PAGE>
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
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
2
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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,
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
3
<PAGE>
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 FMFS for performance of the duties listed in
this Agreement and the fees and out-of pocket expenses as set forth in
the attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Trust and FMFS.
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 FMFS render fund
administration services, under the terms hereof, it shall so notify
FMFS in writing, and if FMFS 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 FMFS 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. FMFS 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 FMFS may be unable to
recognize and perform properly date-sensitive functions
involving certain dates
4
<PAGE>
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. FMFS 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"). FMFS 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 FMFS 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 FMFS's computed
applications.
FMFS shall exercise reasonable care in the performance of its
duties under this Agreement. FMFS 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 FMFS's control, except a loss resulting from FMFS'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 FMFS shall
take all reasonable steps to minimize service interruptions
for any period that such interruption continues beyond FMFS's
control. FMFS 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 FMFS. FMFS 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 FMFS's premises and
operating capabilities at
5
<PAGE>
any time during regular business hours of FMFS, upon
reasonable note to FMFS.
Regardless of the above, FMFS reserves the right to reprocess
and correct administrative errors at its own expense.
B. The Trust shall indemnify and hold harmless FMFS 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 FMFS may sustain or incur
or which may be asserted against FMFS 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 FMFS by any duly authorized officer of
the Trust, such duly authorized officer to be included in a list of
authorized officers furnished to FMFS 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 FMFS'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 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 FMFS harmless, the Trust shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and it is
further understood that FMFS 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 FMFS
against any claim, which may be the subject of this indemnification.
In the event that the Trust so elects, it will so notify FMFS and
thereupon the Trust shall take over complete defense of the claim, and
FMFS shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section.
FMFS shall in no case confess any claim or make any compromise in any
case in which the Trust
6
<PAGE>
will be asked to indemnify FMFS except with the Trust's prior
written consent.
C. FMFS 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 FMFS as a result of FMFS's refusal or failure to comply
with the terms of this Agreement, its bad faith, negligence, or
willful misconduct.
VI. Confidentiality
FMFS shall handle, in confidence, all information relating to the
Trust's business which is received by FMFS during the course of
rendering any service hereunder.
VII. Data Necessary to Perform Service
The Trust or its agent, which may be FMFS, shall furnish to FMFS 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 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 FMFS's duties or responsibilities hereunder is designated by the
Trust by written notice to FMFS, FMFS 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 FMFS under this Agreement in a form reasonably
acceptable to the Trust (if such form differs from the form in which
FMFS has maintained, the Trust shall pay any expenses associated with
transferring the data to such
7
<PAGE>
form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FMFS'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 FMFS shall be sent to Firstar Mutual Fund Services,
LLC, 615 East Michigan Street, Milwaukee, WI 53202, 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
FMFS 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. FMFS agrees that all such records prepared or maintained by
FMFS relating to the services to be performed by FMFS 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.
XIII. Notice
The name T.O. Richardson Trust is the designation of the Trustees under
the Declaration of 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. The obligations of the
Trust 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 Trust, but the Trust's property only shall
be bound.
8
<PAGE>
T. O. RICHARDSON TRUST FIRSTAR MUTUAL FUND SERVICES,
LLC
By:/s/ Samuel Bailey, Jr. By: /s/ Joe D. Redwine
- -------------------------------------- -------------------------------------
Samuel Bailey, Jr. Joe D. Redwine
9
<PAGE>
Fund Administration and Compliance
Annual Fee Schedule
o Annual fee:
o 6 basis points (.0006) on the first $200,000,000
o 5 basis points (.0005) on the next $500,000,000
o 3 basis points (.0003) on the balance
o Minimum annual fee: $40,250 for the first fund
$35,000 per fund for the next three funds
$25,000 for additional funds
o Out-of-Pocket expenses, including, but not limited to:
o Postage
o Stationary
o Programming
o Proxies
o Retention of records
o Special reports
o Federal and state regulatory filing fees
o Certain insurance premiums
o All other out-of-pocket expenses
o Expenses from Board of Directors meetings
o Auditing and legal expenses
o Fees are billed monthly
10
<PAGE>
FUND ACCOUNTING SERVICING AGREEMENT
This contract between T.O. Richardson Trust, a Massachusetts business trust,
hereinafter called the "Trust," and Firstar Mutual Fund Services, LLC, a
Wisconsin corporation, hereinafter called "FMFS," is entered into on this 21 day
of December 1998.
WHEREAS, the Trust is an open-end management investment company registered under
the Investment Company Act of 1940; and
WHEREAS, FMFS 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. FMFS 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.
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<PAGE>
(2) Record payments for Trust expenses upon receipt of
written authorization from the Trust.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail,
as agreed upon by FMFS 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 FMFS 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 FMFS 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
FMFS.
4. Changes in Equipment, Systems, Service, Etc. FMFS 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.
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<PAGE>
5. Compensation. FMFS 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.
6. Performance of Service.
A. FMFS shall exercise reasonable care in the performance of its duties
under this Agreement. FMFS 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 FMFS's control, except a loss
resulting from FMFS'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 FMFS 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 FMFS may sustain or incur or which may be
asserted against FMFS 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 FMFS by any duly authorized
officer of the Trust, such duly authorized officer to be included in a
list of authorized officers furnished to FMFS 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,
FMFS shall take all reasonable steps to minimize
service interruptions for any period that such
interruption continues beyond FMFS's control. FMFS
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 FMFS. FMFS 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 FMFS's premises and
operating capabilities at any time during regular
business hours of FMFS, upon reasonable notice to
FMFS.
Regardless of the above, FMFS reserves the right to
reprocess and correct administrative errors at its
own expense.
-3-
<PAGE>
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 FMFS harmless, the Trust shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FMFS 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 FMFS against any claim which may be the subject of
this indemnification. In the event that the Trust so elects, it will
so notify FMFS and thereupon the Trust shall take over complete
defense of the claim, and FMFS shall in such situation initiate no
further legal or other expenses for which it shall seek
indemnification under this section. FMFS shall in no case confess any
claim or make any compromise in any case in which the Trust will be
asked to indemnify FMFS except with the Trust's prior written consent.
C. FMFS 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 FMFS as a
result of FMFS's refusal or failure to comply with the terms
of this Agreement, its bad faith, negligence, or willful
misconduct.
7. Records. FMFS 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. FMFS agrees that all
records prepared or maintained by FMFS relating to the services
to be performed by FMFS 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. FMFS shall handle in confidence all information
relating to the Trusts' business which is received by FMFS during
the course of rendering any service hereunder.
9. Data Necessary to Perform Services. The Trust or its agent, which may
be FMFS, shall furnish to FMFS 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 FMFS of any balancing or
control error caused by FMFS within three (3) business days after
receipt of any reports
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<PAGE>
rendered by FMFS 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 FMFS render
accounting services, under the terms hereof, it shall so notify FMFS in
writing, and if FMFS agrees in writing to provide services, such series
will be subject to the terms and conditions of this Agreement, and
shall be maintained and accounted for by FMFS 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 FMFS's duties or responsibilities
hereunder is designated by the Fund by written notice to FMFS, FMFS 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 FMFS under this Agreement in a form reasonably
acceptable to the Fund (if such form differs from the form in which FMFS
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
FMFS'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 FMFS 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.
16. Notice. The name T.O. Richardson Trust is the designation of the
Trustees under the Declaration of 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. The
obligations of the Trust are not personally binding upon, nor shall
resort be had to the private property of, any of
-5-
<PAGE>
the Trustees, shareholders, officers, employees or agents of the Trust,
but the Trust's property only shall be bound.
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<PAGE>
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
Firstar Mutual Fund Services, LLC
By: /s/ Joe D. Redwine
----------------------------------------
Joe D. Redwine
T.O. Richardson Trust
By: /s/ Samuel Bailey, Jr.
----------------------------------------
Samuel Bailey, Jr.
-7-
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Shareholder Accounting Services
No-Load Funds
Annual Fee Schedule
o $14.00 per shareholder account
o Minimum annual fee of $27,000 for the first fund and $15,000 for each
additional fund and class of share.
o Plus out-of-pocket expenses, including but not limited to:
o Telephone - toll-free lines
o Postage
o Programming
o Stationary/envelopes o Mailing o Insurance o Proxies o Retention of
records o Microfilm/fiche of records o Special reports
o All other out-of-pocket expenses
o ACH fees
o Fees are billed monthly
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Shareholder Accounting Services
Automatic Investment Plan Processing
ACH Service
o Automatic Investment Plan
o Telephone Purchase, Liquidation
o EFT Payments of Dividends, Capital Gains, SWP's
o $125.00 per month per fund group
o $0.50 per account set-up and/or change
o $0.50 per item for AIP purchases
o $0.50 per item for EFT payments, purchases
o $3.50 per correction, reversal, or return item
o Fees are billed monthly
-9-
<PAGE>
Fund Valuation and Accounting
Domestic Portfolios
Annual Fee Schedule
Fixed Income Funds
o Annual fee per fund based on market value of assets:
o $28,000 for the first $40,000,000
o 2/100 of 1% (1 basis point) on the next $200,000,000
o 5/1000 of 1% (1/2 basis point) on the balance
o 25% of annual minimum for each class of share
o Out-of-pocket expenses, including daily pricing service
Money Market Funds
o Annual fee per fund based on market
value of assets:
o $25,300 for the first $40,000,000
o 1/100 of 1% (1 basis point) on the nest $200,000,000
o 5/1000 of 1% (1/2 basis point) on the balance
o 25% of annual minimum for each
class of share
o Out-of-pocket expenses, including daily
pricing service
MoneyMarket Fu
o Annual fee per fund based on market
value of assets:
o $28,500 of the first $40,000,000
o 1/100 of 1% (1 basis point) on the nest $200,000,000
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o 5/1000 of 1% (1/2 basis point) on
the balance
o 25% of annual minimum for each
class of share
o Out-of-pocket expenses, including daily pricing service
All fees and out-of-pocket expenses are billed monthly.
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Fund Valuation and Accounting
Asset Pricing Cost
Charge per Item per Valuation
Asset Type (daily, weekly, etc.)
Domestic and Canadian Equities $0.15
(NYSE, OTC)
Options $0.15
Corporate/Government/Agency Bonds $0.50
CMOs $0.80
International Equities and Bonds $0.50
Municipal Bonds $0.80
Money Market Instruments $0.80
Pricing costs are billed monthly.
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<PAGE>
FULFILLMENT SERVICING AGREEMENT
This Agreement between Firstar Mutual Fund Services, LLC ("FMFS") and T. O.
Richardson Trust (the "Trust") is entered into on this 21 day of December 1998.
WHEREAS, the Trust provides investment opportunities to prospective shareholders
through a family of open end mutual funds; and
WHEREAS, FMFS provides fulfillment services to mutual funds;
NOW, THEREFORE, the parties agree as follows:
Duties and Responsibilities of FMFS
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 FMFS as necessary.
2. Supply FMFS with sufficient inventory of fulfillment materials as
requested from time to time by FMFS.
3. Provide FMFS with any sundry information about the Trust in order to
answer prospect questions.
Compensation
The Trust agrees to compensate FMFS 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.
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Proprietary and Confidential Information
FMFS 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 FMFS 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.
Notice
The name T.O. Richardson Trust is the designation of the Trustees under the
Declaration of 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. The obligations of the Trust 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 Trust, but the
Trust's property only shall be bound.
Dated this 21 day of December 1998
FIRSTAR MUTUAL FUND SERVICES, LLC T. O. RICHARDSON TRUST
By: /s/ Joe D. Redwine By: /s/ Samuel Bailey, Jr.
- ----------------------------------------------- -------------------------------
Joe D. Redwine Samuel Bailey, Jr.
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<PAGE>
FULFILLMENT SERVICES PROPOSAL FOR
THE T.O. RICHARDSON SECTOR ROTATION FUND
SCOPE: This estimate details the initial setup and ongoing costs to
provide full service fulfillment ------ services.
Voice Response Unit directs fulfillment calls to Firstar's Fulfillment
Services Department.
The Fulfillment Services Department will be staffed from 8:00 a.m. to
7:00 p.m. (Central Time) Monday-Friday. Calls received during
non-business hours will be directed to the voice response unit, which
provides the option to record a prospect's fulfillment request.
Each weekday morning, a fulfillment representative transcribes
voice mail requests into the KATOE Fulfillment system. The
system will generate a report listing all leads received from
the previous day. This report will be used to mail literature
to prospective shareholders.
Each morning personalized cover letters are generated by the
fulfillment system. The items requested are printed at the
bottom of the letter to assist in the mailing of your funds'
literature.
Inventory is maintained at Firstar. The Fulfillment Services
Manger will be in close contact with either a representative
of the Funds, or the Relationship Manager assigned to the
funds, in order to replenish supplies.
Basic fund Setup Package:
o Single fund Database Setup/Entry
o Single Blue Sky Database Setup/Entry
o Up to 10 Separate Literature Database Entries
o Kit Package Linking
o Report Programming
o Fund Help Screen Setup
8 hours @ $60* $480
4 hours@ $30** $120
Basic Report Setup Package:
o Customization of Fulfillment Report
o Includes: Date/Time of Request, Name, Address,
o Telephone Number, Marketing Source, etc.
4 hours@ $60* $120
Voice Response unite Modifications:
o Coding Change to direct calls to Literature Fulfillment
No charge $ 0
------
One Time Fee = $840
*=Developmental costs are factored at $60 per hour which includes programming,
personnel, equipment, and system upgrade costs. **=Administrative costs are
factored at $30 per hour which includes personnel costs.
-3-
<PAGE>
FULFILLMENT SERVICES PROPOSAL FOR
THE T.O. RICHARDSON SECTOR ROTATION FUND
Ongoing
Costs: Front Office Service Fee Includes:
o Answering of all Fulfillment calls from 8:00 a.m. - 7:00 p.m.,
(Central Time) Monday-Friday
o Recording of all Fulfillment requests left during non-business hours
o Transcription of all voice mail requests
$. 99/minute
$1.00/monthly minimum
NOTE: On the average, most literature fulfillment calls
average 1.8 minutes in length. This would calculate to $1.78
per average call. The $100 minimum monthly fee would account
for approximately 55 calls per month.
Back Office Service Fee Includes:
o Envelope inserting of up to 4 items per customer $ .45
o Additional inserts $ .15
o Custom letter (included)
o Inventory tracking (included)
o Inventory storage (included)
o Periodic activity reports showing prospects by:
state of residence, literature items requested,
market source (included)
Out-of-pocket expenses include but are not limited to:
o Postage
-4-
<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 1st day of July, 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.
<PAGE>
T.O. RICHARDSON TRUST
CONSENTS OF PERSONS ABOUT TO BECOME TRUSTEES
The undersigned persons are named as Trustees of T.O. Richardson Trust
in the Prospectus and 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 each hereby consents to the use of his name in such Prospectus and
Statement of Additional Information.
/s/ John R. Birk
- --------------------------------------------------------------
John R. Birk
/s/ Lloyd P. Griffiths
- --------------------------------------------------------------
Lloyd P. Griffiths
/s/ David B. H. Martin
- --------------------------------------------------------------
David B. H. Martin
/s/ Robert T. Samuels
- --------------------------------------------------------------
Robert T. Samuels
Dated: October 19, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned, T.O. RICHARDSON
TRUST, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), T.O. Richardson Trust -- T.O. Richardson
Sector Rotation Fund -- the initial series portfolio of the Trust (the
"Fund"), and certain Trustees and officers of the Trust and the Fund, do
hereby constitute and appoint SAMUEL BAILEY, JR., KATHLEEN M. RUSSO, ELAINE
E. RICHARDS AND DAVID M. LEAHY, and each of them individually, their true
and lawful attorneys and agents to take any and all action and execute any
and all instruments which said attorneys and agents may deem necessary or
advisable:
(i) to enable the Trust and the Fund to comply with the Securities Act
of 1933, as amended, and any rules, regulations, orders or other
requirements of the Securities and Exchange Commission thereunder, in
connection with the registration under such Securities Act of 1933 of
shares of beneficial interest of the Fund to be offered by the Trust and
the Fund; and
(ii) in connection with the registration of the Trust and the Fund
under the Investment Company Act of 1940, as amended,
including specifically, but without limitation of the foregoing, power of
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the names of each of such Trustees and officers in his behalf as such
Trustee or officer as indicated below opposite his signature hereto, to any
amendment or supplement (including post- effective amendments) to the
registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933 and such Investment Company Act of
1940, and to execute any instruments or documents filed or to be filed as a part
of or in connection with such registration statement or statements; and each of
the undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
-1-
<PAGE>
IN WITNESS WHEREOF, the Trust and the Fund have caused these presents
to be signed by the Chairman of the Trust, and the same attested by its
Secretary, each thereunto duly authorized by its Trustees, and each of the
undersigned has set his hand hereto as of the day set opposite his name.
T.O. RICHARDSON TRUST
on behalf of
T.O. Richardson Sector Rotation Fund
By /s/ Samuel Bailey, Jr.
---------------------------------------
Samuel Bailey, Jr.
Chairman of the Board and President
DATE: October 19, 1998
/s/ Kathleen M. Russo
- ------------------------------------
Kathleen M. Russo
Secretary
-2-
<PAGE>
Name Office Held Under the Trust and the Fund
/s/ Samuel Bailey, Jr. Chairman of the Board and October 19, 1998
- ------------------------------- President
Samuel Bailey, Jr.
/s/ John R. Birk Trustee October 19, 1998
- -------------------------------
John R. Birk
/s/ Lloyd P. Griffiths Trustee October 19, 1998
- -------------------------------
Lloyd P. Griffiths
/s/ David B. H. Martin Trustee October 19, 1998
- -------------------------------
David B. H. Martin
/s/ Robert T. Samuels Trustee October 19, 1998
- -------------------------------
Robert T. Samuels
-3-
<PAGE>
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
December 22, 1998
T.O. Richardson Trust
Two Bridgewater Road
Farmington, Connecticut
T.O. Richardson Trust
Gentlemen:
We have acted as counsel for T.O. Richardson Trust (the "Trust") in
connection with the offer by the Trust of an unlimited number of shares of
beneficial interest of the Trust (the "Shares") which are currently classified
as one initial series portfolio -- T.O. Richardson Sector Rotation Fund (the
"Fund"). We have participated in the preparation of the Trust's Registration
Statement (the "Registration Statement") on Form N-1A (Registration No.
333-58185) relating to the Shares filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended, on
June 30, 1998, Pre-Effective Amendment No. 1 to the Registration Statement filed
with the Commission on September 9, 1998 and Pre-Effective Amendment No. 2 to
the Registration Statement to be filed with the Commission on December 22, 1998.
The Prospectus included in each Registration Statement as amended to date is
herein called the "Prospectus."
In so acting, we have participated in the preparation of the
Declaration of Trust of the Trust, dated June 2, 1998 (the "Declaration of
Trust"). We have also examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
documents, certificates and other instruments, and have made such other
investigations, as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
We are of the following opinion:
1. The Trust has been duly established as an unincorporated voluntary
association under Massachusetts law and has made all filings required to be made
by a voluntary association under Chapter 182 of the Massachusetts General Laws.
<PAGE>
T.O. Richardson Trust -2- December 22, 1998
2. Upon the issue of Shares for cash at the Fund's net asset value and
receipt by the Trust of the authorized consideration therefor as set forth in
the Prospectus, the Shares so issued will be validly issued, fully paid and
nonassessable by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, holders of Shares could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts,
obligations or affairs of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation, or instrument entered into or executed
by the Trust or the Trustees on behalf of the Trust. The Declaration of Trust
provides for indemnification out of the Trust's property for all loss and
expense of any shareholder held personally liable for the obligations of the
Trust. Accordingly, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with the
registration of the Shares for offering and sale pursuant to the Securities Act
of 1933, as amended. We consent to the filing of this opinion with and as a part
of the Registration Statement.
Very truly yours,
/s/ Sullivan & Worcester LLP
--------------------------------------
SULLIVAN & WORCESTER LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report,
and to all references to our firm, included in or made a part of this Form N1-A
registration statement of the T.O. Richardson Sector Rotation Fund.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
December 21, 1998.
<PAGE>
SUBSCRIPTION AGREEMENT
September 14, 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, I 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.
I 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.
I represent and warrant to the Trust that the Shares are being acquired
by me for investment and not with a view to the resale or further distribution
thereof and that I have no present intention to redeem the Shares.
The name T.O. Richardson Trust is the designation of the Trustees under
the Declaration of 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. The obligations of the Trust 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 Trust, but the
Trust's property only shall be bound.
-1-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
/s/ L. Austine Crowe
-----------------------------------
L. Austine Crowe
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
<PAGE>
Individual Retirement Account Disclosure Statement
GENERAL INFORMATION
Please read the following information together with the Individual Retirement
Account Custodial Agreement and the Prospectus(es) for the fund(s) you select
for investment of IRA contributions.
GENERAL PRINCIPLES
1. Are There Different Types of IRAs?
Yes. Upon creation of an IRA, you must designate whether the IRA will be a
Traditional IRA, a Roth IRA, or an Education IRA. (In addition, there are
SEP-IRAs and SIMPLE IRAs, which are discussed in the Disclosure Statement for
Traditional IRAs).
o In a Traditional IRA, amounts contributed to the IRA may be tax deductible at
the time of contribution. Distributions from the IRA will be taxed at
distribution except to the extent that the distribution represents a return of
your own contributions for which you did not claim (or where not eligible to
claim) a deduction.
o In a Roth IRA, amounts contributed to your IRA are taxed at the time of
contribution, but distributions from the IRA are not subject to tax if you have
held the IRA for certain minimum periods of time (generally, until age 591_2 but
in some cases longer).
o In an Education IRA, you contribute to an IRA maintained on behalf of a
beneficiary and do not receive a current deduction. However, if amounts are used
for certain educational purposes, neither you nor the beneficiary of the IRA are
taxed upon distribution. Each type of IRA is a custodial account created for the
exclusive benefit of the beneficiary you (or your spouse) in the case of the
Traditional IRA and Roth IRA, and a named beneficiary in the case of an
Education IRA. Firstar Trust Company serves as custodian of the IRA. Your, your
spouse's or your beneficiary's (as applicable) interest in the account is
nonforfeitable.
2. Can I Revoke My Account? This account may be revoked any time within seven
calendar days after it is established by mailing or delivering a written request
for revocation to: T.O. Richardson Trust, c/o Firstar Trust Company, 615 East
Michigan Street, 3rd Floor, Milwaukee, Wisconsin 53202, Attention: Mutual Fund
Department. If the revocation is mailed, the date of the postmark (or the date
of certification if sent by certified or registered mail) will be considered the
revocation date. Upon proper revocation, a full refund of the initial
contribution will be issued, without any adjustments for items such as
administrative fees or fluctuations in market value. You may always revoke your
account after this time, but the amounts distributed to you will be subject to
the tax rules applicable upon distribution from an IRA account as discussed
below. (While current regulations technically only extend the right to revoke to
Traditional IRAs, it has been assumed that that right applies to all Roth and
Education IRAs as well and such IRAs will thus be administered consistent with
that interpretation until the IRS issues guidance to the contrary.) 3. How Will
My Account Be Invested? Contributions made to an IRA will be invested, at your
election, in one or more of the regulated investment companies for which T.O.
Richardson Company, Inc. serves as Investment Advisor or any other regulated
investment company designated by T.O. Richardson Company, Inc. No part of the
IRA may be invested in life insurance contracts; further, the assets of the IRA
may not be commingled with other property. Information about the shares of each
mutual fund available for investment by your IRA must be furnished to you in the
form of a prospectus governed by rules of the Securities and Exchange
Commission. Please refer to the prospectus for detailed information concerning
your mutual fund. You may obtain further information concerning IRAs from any
District Office of the Internal Revenue Service. Fees and other expenses of
maintaining the account may be charged to you or the account. The Custodian's
current fee schedule follows. The fee schedule may be changed from time to time.
Transfer to successor trustee $ 15.00
Distribution to a participant 15.00
(exclusive of systematic withdrawal plans)
Refund of excess contribution 15.00
Federal wire fee 12.00
Traditional &Roth IRA annual maintenance fee
per account 12.50*
Education IRA annual maintenance fee
per account 5.00*
Reconversion/Recharacterization 15.00
*capped at $25.00 per social security number.
Individual Retirement Account Disclosure
Statement For Traditional IRAs
1. Am I Eligible to Contribute to a Traditional IRA? Employees with compensation
income and self-employed individuals with earned income are eligible to
contribute to a Traditional IRA. (For convenience, all future references to
compensation are deemed to mean "earned income" in the case of a
<PAGE>
self-employed individual.) Employers may also contribute to Traditional IRAs
established for the benefit of their employees. In addition, you may establish a
Traditional IRA to receive rollover contributions and transfers from the trustee
or custodian of another Traditional IRA or the custodian or trustee of certain
other retirement plans.
2. When Can I Make Contributions? You may make regular contributions to your
Traditional IRA any time up to and including the due date for filing your tax
return for the year, not including extensions. You may continue to make regular
contributions to your Traditional IRA up to (but not including) the calendar
year in which you reach age 701_2. (If you are over age 701_2 but your spouse
has not yet attained that age, contributions to your spouse's Traditional IRA
may continue so long as you and your spouse, based on a joint tax return, have
sufficient compensation income.) Employer contributions to a Simplified Employee
Pension Plan or a SIMPLE Plan may be continued after you attain age 701_2.
Eligible rollover contributions and transfers may be made at any time, including
after you reach age 701_2.
3. How Much May I Contribute to a Traditional IRA? You may make annual
contributions to a Traditional IRA in any amount up to 100% of your compensation
for the year or $2,000, whichever is less. The $2,000 limitation is reduced by
contributions you make to a Roth IRA, but is not reduced by contributions to an
Educational IRA for the benefit of another taxpayer. Qualifying rollover
contributions and transfers are not subject to these limitations. In addition,
if you are married and file a joint return, you may make contributions to your
spouse's Traditional IRA. However, the maximum amount contributed to both your
own and to your spouse's Traditional IRA may not exceed 100% of your combined
compensation or $4,000, whichever is less. The maximum amount that may be
contributed to either your Traditional IRA or your spouse's Traditional IRA is
$2,000. Again, these dollar limits are reduced by any contributions you or your
spouse make to a Roth IRA, but are not affected by contributions either of you
make to an Education IRA for the benefit of another taxpayer. If you are the
beneficiary of an Education IRA, certain additional limits may apply to you.
Please contact your tax advisor for more information.
4. Can I Roll Over or Transfer Amounts from Other IRAs or Employer Plans? You
are allowed to "roll over" a distribution or transfer your assets from one
Traditional IRA to another without any tax liability. Rollovers between
Traditional IRAs may be made once per year and must be accomplished within 60
days after the distribution. Also, under certain conditions, you may roll over
(tax-free) all or a portion of a distribution received from a qualified plan or
tax-sheltered annuity in which you participate or in which your deceased spouse
participated. However, strict limitations apply to such rollovers, and you
should seek competent advice in order to comply with all of the rules governing
rollovers. In particular, beginning January 1, 1999, note that you may not roll
over a hardship distribution from an employer's plan to your IRA. Most
distributions from qualified retirement plans will be subject to a 20%
withholding requirement. The 20% withholding can be avoided by electing a
"direct rollover" of the distribution to a Traditional IRA or to certain other
types of retirement plans. You should receive more information regarding these
withholding rules and whether your distribution can be transferred to a
Traditional IRA from the plan administrator prior to receiving your
distribution.
5. Are My Contributions to a Traditional IRA Tax Deductible? Although you may
make a contribution to a Traditional IRA within the limitations described above,
all or a portion of your contribution may be nondeductible. No deduction is
allowed for a rollover contribution (including a "direct rollover") or transfer.
For "regular" contributions, the taxability of your contribution depends upon
your tax filing status, whether you (and in some cases your spouse) are an
"active participant" in an employer-sponsored retirement plan, and your income
level. If you are not married (including a taxpayer filing under the "head of
household" status), the following rules apply:
o If you are not an "active participant" in an employer-sponsored retirement
plan, you may make a fully deductible contribution to a Traditional IRA (up to
the contribution limits described above).
o If you are an "active participant" in an employer-sponsored retirement plan,
you may make a fully deductible contribution to a Traditional IRA (up to the
contribution limits described above) if your adjusted gross income (as defined
below) does not exceed $30,000 for 1998. If your 1998 adjusted gross income is
between $30,000 and $40,000, your deduction will be limited as described below.
If your adjusted gross income exceeds $40,000, your contribution will not be
deductible. After 1998, the deductibility of a contribution is as follows: If
you are married, the following rules apply:
o If you and your spouse file a joint tax return and neither you nor your spouse
is an "active participant" in an employer-sponsored retirement plan, you and
your spouse may make a fully deductible contribution to a Traditional IRA (up to
the contribution limits described above).
o If you and your spouse file a joint tax return and both you and your spouse
are "active participants" in employer-sponsored retirement plans, you and your
spouse may make fully deductible contributions to a Traditional IRA (up to the
contribution limits described above), if your 1998 combined adjusted gross
income (as defined below) does not exceed $50,000. If your 1998 adjusted gross
income is between $50,000 and $60,000, your deduction will be limited as
described below. If your adjusted gross income exceeds $60,000, your
contribution will not be deductible. After 1998, the deductibility
<PAGE>
of a contribution is as follows:
o If you and your spouse file a joint tax return and only one of you is an
"active participant" in an employer-sponsored retirement plan, special rules
apply. If your spouse is the "active participant", a fully deductible
contribution can be made to your IRA (up to the contribution limits described
above) if your combined adjusted gross income does not exceed $150,000. If your
combined adjusted gross income is between $150,000 and $160,000, your deduction
will be limited as described below. If your combined adjusted gross income
exceeds $160,000, your contribution will not be deductible. Your spouse, as an
active participant in an employer-sponsored retirement plan, may make a fully
deductible contribution to a Traditional IRA if your 1998 combined adjusted
gross income does not exceed $50,000 (with a partial deduction being available
if 1998 combined adjusted gross income is between $50,000 and $60,000).
Conversely, if you are an "active participant" and your spouse is not, a
contribution to your Traditional IRA will be deductible if your 1998 combined
adjusted gross income does not exceed $50,000 (with a partial deduction being
available if 1998 combined adjusted gross income is between $50,000 and
$60,000). After 1998, the $50,000 and $60,000 amounts are adjusted in the manner
described in the preceding table; the $150,000 and $160,000 amounts are not
adjusted.
o If you are married and file a separate return and are not an "active
participant" in an employer-sponsored retirement plan, you may make a fully
deductible contribution to a Traditional IRA (up to the contribution limits
described above). If you are married and filing separately and are an "active
participant" in an employer-sponsored retirement plan, you may not make a fully
deductible contribution to a Traditional IRA. A partial deduction is available
if your 1998 adjusted gross income is less than $10,000. This amount is not
adjusted for cost-of-living changes or otherwise. An employer-sponsored
retirement plan includes any of the following types of retirement plans:
o a qualified pension, profit-sharing, or stock bonus plan established in
accordance with IRC 401(a) or 401(k);
o a Simplified Employee Pension Plan (SEP) (IRC 408(k));
o a deferred compensation plan maintained by a governmental unit or agency;
o tax-sheltered annuities and custodial accounts (IRC 403(b) and 403(b)(7));
o a qualified annuity plan under IRC Section 403(a); or
o a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE Plan).
Generally, you are considered an "active participant" in a defined contribution
plan if an employer contribution or forfeiture was credited to your account
during the year. You are considered an "active participant" in a defined benefit
plan if you are eligible to participate in a plan, even though you elect not to
participate. You are also treated as an "active participant" if you make a
voluntary or mandatory contribution to any type of plan, even if your employer
makes no contribution to the plan. For purposes of these rules, adjusted gross
income (1) is determined without regard to the exclusions from income arising
under Section 135 (exclusion of certain savings bond interest), Section 137
(exclusion of certain employer provided adoption expenses) and Section 911
(certain exclusions applicable to U.S. citizens or residents living abroad) of
the Code, (2) is not reduced for any deduction that you may be entitled to for
IRA contributions, and (3) takes into account the passive loss limitations under
Section 469 of the Code and any taxable benefits under the Social Security Act
and Railroad Retirement Act as determined in accordance with Section 86 of the
Code. Please note that the deduction limits are not the same as the contribution
limits. You can contribute to your Traditional IRA in any amount up to the
contribution limits described above (the lesser of $2,000 or 100 percent of your
compensation income). The amount of your contribution that is deductible for
federal income tax purposes is based upon the rules described in this section.
If you (or where applicable, your spouse) is an "active participant" in an
employer-sponsored retirement plan, you can use the following steps to calculate
whether your contribution will be fully or partially deductible: (a) Subtract
the applicable income limit from your adjusted gross income as determined above.
(For example, if you are a single taxpayer, your 1998 income limit is $30,000.)
If the result is $10,000 or more (after 2006, $20,000 or more for a married
individual filing jointly), you can only make a nondeductible contribution to
your Traditional IRA. (b) Divide the above figure by $10,000 (after 2006,
$20,000 for a married individual filing jointly), and multiply that percentage
by $2,000. (c) Subtract the dollar amount (result from (b) above) from $2,000 to
determine the amount that is deductible. If the deduction limit is not a
multiple of $10 then it should be rounded up to the next $10. If you are
eligible to make any deductible contribution, you may make a $200 minimum
deductible contribution. Even if your income exceeds the limits described above,
you may make a contribution to your IRA up to the contribution limitations
described in Item 3 above. To the extent that your contribution exceeds the
deductible limits, it will be nondeductible. However, earnings on all IRA
contributions are tax deferred until distribution.
6. What if I Make an Excess Contribution? Contributions that exceed the
allowable maximum for federal income tax purposes are treated as excess
contributions. A nondeductible penalty tax of 6% of the excess amount
contributed will be added to your income tax for each year in which the excess
contribution remains in your account.
7. How Do I Correct an Excess Contribution? If you make a contribution in excess
of your allowable maximum, you may correct the excess contribution and avoid the
6% penalty tax for that year by withdrawing the excess contribution and its
earnings on or before the date, including extensions, for filing your tax return
for the tax year for which the contribution was made. Any earnings on the
withdrawn excess
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contribution may be subject to a 10% early distribution penalty tax if you are
under age 591_2. In addition, in certain cases an excess contribution may be
withdrawn after the time for filing your tax return. Finally, excess
contributions for one year may be carried forward and applied against the
contribution limitation in succeeding years.
8. Can a Simplified Employee Pension Plan Be Used in Conjunction with a
Traditional IRA? A Traditional IRA may also be used in connection with a
Simplified Employee Pension Plan established by your employer (or by you if you
are self-employed). In addition, if your SEP Plan as in effect on December 31,
1996 permitted salary reduction contributions, you may elect to have your
employer make salary reduction contributions. Several limitations on the amount
that may be contributed apply. First, salary reduction contributions (for plans
that are eligible) may not exceed $10,000 per year (certain lower limits may
apply for highly compensated employees). The $10,000 limit applies for 1998 and
is adjusted periodically for cost of living increases. Second, the combination
of all contributions for any year (including employer contributions and, if your
SEP Plan is eligible, salary reduction contributions) cannot exceed 15 percent
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. It is your responsibility and that of your employer to see that
contributions in excess of normal IRA limits are made under and in accordance
with a valid SEP Plan.
9. Can a Savings and Incentive Match Plan for Employees of Small Employers
("SIMPLE") Be Used in Conjunction with a Traditional IRA? A Traditional IRA may
also be used in connection with a SIMPLE Plan established by your employer (or
by you if you are self-employed). 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, you may elect to have your employer make
salary reduction contributions of up to $6,000 per year to your SIMPLE IRA. The
$6,000 limit applies for 1998 and is adjusted periodically for cost of living
increases. In addition, your employer will contribute certain amounts to your
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 special SIMPLE IRA that is separate and apart from
your other IRAs, (4) if you withdraw from your SIMPLE IRA during the two-year
period during which you first began participation in the SIMPLE Plan, the early
distribution excise tax (if otherwise applicable) is increased to 25 percent;
and (5) during this two-year period, any amount withdrawn may be rolled over
tax-free only into another SIMPLE IRA (and not to a Traditional IRA (that is not
a SIMPLE IRA) or to a Roth IRA). It is your responsibility and that of your
employer to see that contributions in excess of normal IRA limits are made under
and in accordance with a valid SIMPLE Plan.
10. What Forms of Distribution Are Available from a Traditional IRA? You may at
any time request distribution of all or any portion of your account. However,
distributions made prior to your attainment of age 591_2 may be subject to an
additional 10 percent penalty tax. Once you reach your "required beginning date"
(see Item 11 below), distribution of your account may be made in any one of
three methods: (a) a lump-sum distribution, (b) installments over a period not
extending beyond your life expectancy (as determined by actuarial tables), or
(c) installments over a period not extending beyond the joint life expectancy of
you and your designated beneficiary (as determined by actuarial tables). You may
also use your account balance to purchase an annuity contract, in which case
your custodial account will terminate.
11. When Must Distributions from a Traditional IRA Begin? You must begin
receiving the assets in your account no later than April 1 following the
calendar year in which you reach age 701_2 (your "required beginning date"). In
general, the minimum amount that must be distributed each year is equal to the
amount obtained by dividing the balance in your Traditional IRA on the last day
of the prior year (or the last day of the year prior to the year in which you
attain age 701_2) by your life expectancy, the joint life expectancy of you and
your beneficiary, or the specified payment term, whichever is applicable. A
federal tax penalty may be imposed against you if the required minimum
distribution is not made for the year you reach age 701_2 and for each year
thereafter. The penalty is equal to 50% of the amount by which the actual
distribution is less than the required minimum. Unless you or your spouse elects
otherwise, your life expectancy and/or the life expectancy of your spouse will
be recalculated annually. (The election, if you choose to make it, must be made
by your required beginning date.) Once you reach your required beginning date,
an election not to recalculate life expectancy(ies) is irrevocable and will
apply to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated. If you have two or more Traditional IRAs, you may
satisfy the minimum distribution requirements by receiving a distribution from
one of your Traditional IRAs in an amount sufficient to satisfy the minimum
distribution requirements for your other Traditional IRAs. You must still
calculate the required minimum distribution separately for each Traditional IRA,
but then such amounts may be totaled and the total distribution taken from one
or more of your individual Traditional IRAs.
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Distribution from your Traditional IRA must satisfy the special "incidental
death benefit" rules of the Internal Revenue Code. These provisions set forth
certain limitations on the joint life expectancy of you and your beneficiary. If
your beneficiary is not your spouse, your beneficiary will be generally
considered to be no more than 10 years younger than you for the purpose of
calculating the minimum amount that must be distributed.
12. Are There Distribution Rules that Apply after My Death? Yes. If you die
before receiving the balance of your Traditional IRA, distribution of your
remaining account balance is subject to several special rules. If you die on or
after your required beginning date, distribution must continue in a method at
least as rapid as under the method of distribution in effect at your death. If
you die before your required beginning date, your remaining interest will, at
the election of your beneficiary or beneficiaries, (i) be distributed by
December 31 of the year in which occurs the fifth anniversary of your death, or
(ii) commence to be distributed by December 31 of the year following your death
over a period not exceeding the life or life expectancy of your designated
beneficiary or beneficiaries. Two additional distribution options are available
if your spouse is the beneficiary: (i) payments to your spouse may commence as
late as December 31 of the year you would have attained age 701_2 and be
distributed over a period not exceeding the life or life expectancy of your
spouse, or (ii) your spouse can simply elect to treat your Traditional IRA as
his or her own, in which case distributions will be required to commence by
April 1 following the calendar year in which your spouse attains age 701_2.
13. How Are Distributions From a Traditional IRA Taxed for Federal Income Tax
Purposes? Amounts distributed to you are generally includable in your gross
income in the taxable year you receive them and are taxable as ordinary income.
To the extent, however, that any part of a distribution constitutes a return of
your nondeductible contributions, it will not be included in your income. The
amount of any distribution excludable from income is the portion that bears the
same ratio as your aggregate nondeductible contributions bear to the balance of
your Traditional IRA at the end of the year (calculated after adding back
distributions during the year). For this purpose, all of your Traditional IRAs
are treated as a single Traditional IRA. Furthermore, all distributions from a
Traditional IRA during a taxable year are to be treated as one distribution. The
aggregate amount of distributions excludable from income for all years cannot
exceed the aggregate nondeductible contributions for all calendar years. No
distribution to you or anyone else from a Traditional IRA can qualify for
capital gains treatment under the federal income tax laws. Similarly, you are
not entitled to the special five- or ten-year averaging rule for lump-sum
distributions that may be available to persons receiving distributions from
certain other types of retirement plans. All distributions are taxed to the
recipient as ordinary income except the portion of a distribution that
represents a return of nondeductible contributions. Historically, so-called
"excess distributions" to you as well as "excess accumulations" remaining in
your account as of your date of death were subject to additional taxes. These
additional taxes no longer apply. You must indicate on distribution requests
whether or not federal income taxes should be withheld. Redemption requests not
indicating an election not to have federal income tax withheld will be subject
to withholding. Any distribution that is properly rolled over will not be
includable in your gross income.
14. Are There Penalties for Early Distribution from a Traditional IRA?
Distributions from your Traditional IRA made before age 591_2 will be subject
(in addition to ordinary income tax) to a 10% nondeductible penalty tax unless
(i) the distribution is a return of nondeductible contributions, (ii) the
distribution is made because of your death, disability, or as part of a series
of substantially equal periodic payments over your life expectancy or the joint
life expectancy of you and your beneficiary, (iii) the distribution is made for
medical expenses in excess of 7.5% of adjusted gross income or is made for
reimbursement of medical premiums while you are unemployed, (iv) the
distribution is made to pay for certain higher education expenses for you, your
spouse, your child, your grandchild, or the child or grandchild of your spouse,
(v) subject to various limits, the distribution is used to purchase a first home
or, in limited cases, a second or subsequent home for you, your spouse, or your
or your spouse's child, grandchild or ancestor, (vi) the distribution is an
exempt withdrawal of an excess contribution, or (vii) beginning in 2000, the
distribution is made on account of an IRS tax levy. The penalty tax may also be
avoided if the distribution is rolled over to another individual retirement
account. See paragraph 9 above for special rules applicable to distributions
from a SIMPLE IRA.
15. What If I Engage in a Prohibited Transaction? If you engage in a "prohibited
transaction," as defined in Section 4975 of the Internal Revenue Code, your
account will be disqualified, and the entire balance in your account will be
treated as if distributed to you and will be taxable to you as ordinary income.
Examples of prohibited transactions are: (a) the sale, exchange, or leasing of
any property between you and your account, (b) the lending of money or other
extensions of credit between you and your account, (c) the furnishing of goods,
services, or facilities between you and your account. If you are under age
591_2, you may also be subject to the 10% penalty tax on early distributions.
16. What If I Pledge My Account? If you use (pledge) all or part of your
Traditional IRA as security for a loan, then the portion so pledged will be
treated as if distributed to you and will be taxable to you as ordinary income
during the year in which you make such pledge. The 10% penalty tax on early
distributions may also apply.
17. How Are Contributions to a Traditional IRA Reported for Federal Tax
Purposes?
<PAGE>
Deductible contributions to your Traditional IRA may be claimed as a deduction
on your IRS Form 1040 for the taxable year contributed. If any nondeductible
contributions are made by you during a tax year, such amounts must be reported
on Form 8606 and attached to your Federal Income Tax Return for the year
contributed. If you report a nondeductible contribution to your Traditional IRA
and do not make the contribution, you will be subject to a $100 penalty for each
overstatement unless a reasonable cause is shown for not contributing. Other
reporting will be required by you in the event that special taxes or penalties
described herein are due. You must also file Form 5329 with the IRS for each
taxable year in which the contribution limits are exceeded, a premature
distribution takes place, or less than the required minimum amount is
distributed from your Traditional IRA.
18. How Are Earnings on My Account Calculated and Allocated? The method of
computing and allocating annual earnings is set forth in Article VIII, Section 1
of the Individual Retirement Account Custodial Agreement. The growth in value of
your IRA is neither guaranteed nor projected.
19. Income Tax Withholding You must indicate on distribution requests whether or
not federal income taxes should be withheld. Redemption requests not indicating
an election not to have federal income tax withheld will be subject to
withholding.
20. Other Information Your Individual Retirement Account Plan has been approved
as to form by the Internal Revenue Service. The Internal Revenue Service
approval is a determination only as to the form of the Plan and does not
represent a determination of the merits of the Plan as adopted by you. You may
obtain further information with respect to your Individual Retirement Account
from any district office of the Internal Revenue Service. Information about the
shares of each mutual fund available for investment by your IRA must be
furnished to you in the form of a prospectus governed by rules of the Securities
and Exchange Commission. Please refer to the prospectus for detailed information
concerning your mutual fund. Traditional Individual Retirement Custodial Account
The following constitutes an agreement establishing an Individual Retirement
Account (under Section 408(a) of the Internal Revenue Code) between the
Depositor and the Custodian.
Article I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in Section
408(k).
Article II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
Section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
Article IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
Section 408(a)(6) and Proposed Regulations Section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations Section
1.401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under Item 3, or to the surviving spouse under Item 4, other than
in the case of a life annuity, life expectancies shall be recalculated annually.
Such election shall be irrevocable as to the Depositor and the surviving spouse
and shall apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin to
be, distributed by the Depositor's required beginning date, April 1 following
the calendar year end in which the Depositor reaches age 701_2. By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in: (a) A single sum payment. (b)
An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor. (c) An annuity
contract that provides equal or substantially equal monthly, quarterly, or
annual payments over the joint
<PAGE>
and last survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy. (e) Equal or
substantially equal annual payments over a specified period that may not be
longer than the joint life and last survivor expectancy of the Depositor and his
or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to him
or her, the entire remaining interest will be distributed as follows: (a) If the
Depositor dies on or after distribution of his or her interest has begun,
distribution must continue to be made in accordance with Item 3. (b) If the
Depositor dies before distribution of his or her interest has begun, the entire
remaining interest will, at the election of the Depositor or, if the Depositor
has not so elected, at the election of the beneficiary or beneficiaries, either:
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or (ii) Be distributed in equal or
substantially equal payments over the life or life expectancy of the designated
beneficiary or beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is the Depositor's
surviving spouse, then this distribution is not required to begin before
December 31 of the year in which the Depositor would have turned age 701_2. (c)
Except where distribution in the form of an annuity meeting the requirements of
Section 408(b)(3) and its related regulations has irrevocably commenced,
distributions are treated as having begun on the Depositor's required beginning
date, even though payments may actually have been made before that date. (d) If
the Depositor dies before his or her entire interest has been distributed and if
the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Depositor (or the joint life and last survivor expectancy of the Depositor and
the Depositor's designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under Item 3,
determine the initial life expectancy (or joint life and last survivor
expectancy) using the attained ages of the Depositor and designated beneficiary
as of their birthdays in the year the Depositor reaches age 701_2. In the case
of a distribution in accordance with Item 4(b)(ii), determine life expectancy
using the attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
Article V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) and
Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
Article VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
Article VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations.
Article VIII
1. Investment of Account Assets (a) All contributions to the custodial account
shall be invested in the shares of the T.O. Richardson Trust or, if available,
any other series of T.O. Richardson Trust or other regulated investment
companies for which T.O. Richardson Company, Inc. serves as Investment Advisor
or designates as being eligible for investment ("Investment Company"). Shares of
stock of an Investment Company shall be referred to as "Investment Company
Shares." To the extent that two or more funds are available for investment,
contributions shall be invested in accordance with the Depositor's investment
election. (b) Each contribution to the custodial account shall identify the
Depositor's account number and be accompanied by a signed statement directing
the investment of that contribution. The Custodian may return to the Depositor,
without liability for interest thereon, any contribution which is not
accompanied by adequate account identification or an appropriate signed
statement directing investment of that contribution. (c) Contributions shall be
invested in whole and fractional Investment Company Shares at the price and in
the manner such shares are offered to the public. All distributions received on
Investment Company Shares, including both dividend and capital gain
distributions, held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in additional
like shares or in cash or other property, the Custodian shall elect to receive
<PAGE>
such distribution in additional like Investment Company Shares. (d) All
Investment Company Shares acquired by the Custodian shall be registered in the
name of the Custodian or its nominee. The Depositor shall be the beneficial
owner of all Investment Company Shares held in the custodial account and the
Custodian shall not vote any such shares, except upon written direction of the
Depositor, timely received, in a form acceptable to the Custodian. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy and
related proxy soliciting materials applicable to Investment Company Shares held
in the custodial account received by the Custodian. (e) The Depositor may, at
any time, by written notice to the Custodian, in a form acceptable to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company upon the
terms and within the limitations imposed by then current prospectus of such
other Investment Company in which the Depositor elects to invest. By giving such
instructions, the Depositor will be deemed to have acknowledged receipt of such
prospectus. Such redemptions and reinvestments shall be done at the price and in
the manner such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination (a) T.O. Richardson Company, Inc., the Investment
Advisor for T.O. Richardson Trust, may amend the Custodial Account (including
retroactive amendments) by delivering to Custodian and to the Depositor written
notice of such amendment setting forth the substance and effective date of the
amendment. The Custodian and the Depositor shall be deemed to have consented to
any such amendment not objected to in writing by the Custodian or Depositor as
applicable within thirty (30) days of receipt of the notice, provided that no
amendment shall cause or permit any part of the assets of the custodial account
to be diverted to purposes other than for the exclusive benefit of the Depositor
or his or her beneficiaries. (b) The Depositor may terminate the custodial
account at any time by delivering to the Custodian a written notice of such
termination. (c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire balance.
3. Taxes and Custodial Fees Any income taxes or other taxes levied or assessed
upon or in respect of the assets or income of the custodial account and any
transfer taxes incurred shall be paid from the custodial account. All
administrative expenses incurred by the Custodian in the performance of its
duties, including fees for legal services rendered to the Custodian, in
connection with the custodial account, and the Custodian's compensation shall be
paid from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries. Sufficient shares will be liquidated from the custodial
account to pay such fees and expenses. The Custodian's fees are set forth in a
schedule provided to the Depositor. Extraordinary charges resulting from unusual
administrative responsibilities not contemplated by the schedule will be subject
to such additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance will
be remitted to the Depositor, or reinvested or transferred in accordance with
the Depositor's instructions.
4. Reports and Notices (a) The Custodian shall keep adequate records of
transactions it is required to perform hereunder. After the close of each
calendar year, the Custodian shall provide to the Depositor or his or her legal
representative a written report or reports reflecting the transactions effected
by it during such year and the assets and liabilities of the Custodial Account
at the close of the year. (b) All communications or notices shall be deemed to
be given upon receipt by the Custodian at: Firstar Trust Company, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701 or the Depositor at his or her most recent
address shown in the Custodian's records. The Depositor agrees to advise the
Custodian promptly, in writing, of any change of address.
5. Designation of Beneficiary The Depositor may designate a beneficiary or
beneficiaries to receive benefits from the custodial account in the event of the
Depositor's death. In the event the Depositor has not designated a beneficiary,
or if all beneficiaries shall predecease the Depositor, the following persons
shall take in the order named: (a) The spouse of the Depositor; (b) If the
spouse shall predecease the Depositor or if the Depositor does not have a
spouse, then to the Depositor's estate. The Depositor may also change or revoke
any previously made designation of beneficiary. A designation or change or
revocation of a designation shall be made by written notice in a form acceptable
to and filed with the Custodian, prior to the complete distribution of the
balance in the custodial account. The last such designation on file at the time
of the Depositor's death shall govern. If a beneficiary dies after the
Depositor, but prior to receiving his or her entire interest in the custodial
account, the remaining interest in the custodial account shall be paid to the
beneficiary's estate.
6. Multiple Individual Retirement Accounts In the event the Depositor maintains
more than one individual retirement account (as defined in Section 408(a)) and
elects to satisfy his or her minimum distribution requirements described in
Article IV above by making a distribution for another individual retirement
account in accordance with Item 6 thereof, the Depositor shall be deemed to have
elected to calculate the
<PAGE>
amount of his or her minimum distribution under this custodial account in the
same manner as under the individual retirement account from which the
distribution is made.
7. Inalienability of Benefits The benefits provided under this custodial account
nor the assets held therein shall be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to cause
such benefits or assets to be so subjected shall not be recognized except to the
extent as may be required by law.
8. Rollover Contributions and Transfers The Custodian shall have the right to
receive rollover contributions and to receive direct transfers from other
custodians or trustees. All contributions must be made in cash or check.
9. Conflict in Provisions To the extent that any provisions of this Article VIII
shall conflict with the provisions of Articles IV, V and/or VII, the provisions
of this Article VIII shall govern.
10. Applicable State Law This custodial account shall be construed, administered
and enforced according to the laws of the State of Wisconsin.
11. Resignation or Removal of Custodian The Custodian may resign at any time
upon thirty (30) days notice in writing to the Investment Company. Upon such
resignation, the Investment Company shall notify the Depositor, and shall
appoint a successor custodian under this Agreement. The Depositor or the
Investment Company at any time may remove the Custodian upon 30 days written
notice to that effect in a form acceptable to and filed with the Custodian. Such
notice must include designation of a successor custodian. The successor
custodian shall satisfy the requirements of Section 408(h) of the Code. Upon
receipt by the Custodian of written acceptance of such appointment by the
successor custodian, the Custodian shall transfer and pay over to such successor
the assets of and records relating to the Custodial Account. The Custodian is
authorized, however, to reserve such sum of money as it may deem advisable for
payment of all its fees, compensation, costs and expenses, or for payment of any
other liability constituting a charge on or against the assets of the Custodial
Account or on or against the Custodian, and where necessary may liquidate shares
in the Custodial Account for such payments. Any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor Custodian. The Custodian shall not be liable for the acts or omissions
of any predecessor or successor custodian or trustee.
12. Limitation on Custodian Responsibility The Custodian will not under any
circumstances be responsible for the timing, purpose or propriety of any
contribution or of any distribution made hereunder, nor shall the Custodian
incur any liability or responsibility for any tax imposed on account of any such
contribution or distribution. Further, the custodian shall not incur any
liability or responsibility in taking or omitting to take any action based on
any notice, election, or instruction or any written instrument believed by the
Custodian to be genuine and to have been properly executed. The Custodian shall
be under no duty of inquiry with respect to any such notice, election,
instruction, or written instrument, but in its discretion may request any tax
waivers, proof of signatures or other evidence which it reasonably deems
necessary for its protection. The Depositor and the successors of the Depositor
including any executor or administrator of the Depositor shall, to the extent
permitted by law, indemnify the Custodian and its successors and assigns against
any and all claims, actions or liabilities of the Custodian to the Depositor or
the successors or beneficiaries of the Depositor whatsoever (including without
limitation all reasonable expenses incurred in defending against or settlement
of such claims, actions or liabilities) which may arise in connection with this
Agreement or the Custodial Account, except those due to the Custodian's own bad
faith, gross negligence or willful misconduct. The Custodian shall not be under
any duty to take any action not specified in this Agreement, unless the
Depositor shall furnish it with instructions in proper form and such
instructions shall have been specifically agreed to by the Custodian, or to
defend or engage in any suit with respect hereto unless it shall have first
agreed in writing to do so and shall have been fully indemnified to its
satisfaction.
Individual Retirement Account Disclosure Statement For Roth IRAs
1. Am I Eligible to Contribute to a Roth IRA? Anyone with compensation income
whose adjusted gross income does not exceed the limits described below is
eligible to contribute to a Roth IRA. (For convenience, all future references to
compensation are deemed to mean "earned income" in the case of a self-employed
individual.)You may also establish a Roth IRA to receive rollover contributions
or transfers from another Roth IRA or, in some cases, from a Traditional IRA.
You may not roll amounts into a Roth IRA from other retirement plans such as an
employer-sponsored qualified plan. However, current law does not appear to
prohibit a rollover from a qualified plan into a Traditional IRA and then from
the Traditional IRA into a Roth IRA.
2. When Can I Make Contributions? You may make annual contributions to your Roth
IRA any time up to and including the due date for filing your tax return for the
year, not including extensions. Unlike a Traditional IRA, you may continue to
make regular contributions to your Roth IRA even after you attain age 701_2. In
addition, rollover contributions and transfers (to the extent permitted as
discussed
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below) may be made at any time, regardless of your age.
3. How Much May I Contribute to a Roth IRA? You may make annual contributions to
a Roth IRA in any amount up to 100% of your compensation for the year or $2,000,
whichever is less. The $2,000 limitation is reduced by any contributions made by
you or on your behalf to any other individual retirement plan (such as a
Traditional IRA) except SEP IRAs and SIMPLE IRAs. Your annual contribution
limitation is not reduced by contributions you make to an Education IRA that
covers someone other than yourself. In addition, qualifying rollover
contributions and transfers are not subject to these limitations. If you are
married and file a joint return, you may make contributions to your spouse's
Roth IRA. However, the maximum amount contributed to both your own and to your
spouse's Roth IRA may not exceed 100% of your combined compensation or $4,000,
whichever is less. The maximum amount that may be contributed to either your
Roth IRA or your spouse's Roth IRA is $2,000. Again, these dollar limits are
reduced by any contributions made by or on behalf of your or your spouse to any
other individual retirement plan (such as a Traditional IRA) except SEP IRAs and
SIMPLE IRAs. Again, the limit is not reduced for contributions either of you
make to an Education IRA for someone other than yourselves. As noted in Item 1,
your eligibility to contribute to a Roth IRA depends on your adjusted gross
income (as defined below). The amount that you may contribute to a Roth IRA is
reduced proportionately for adjusted gross income (as described below) which
exceeds the applicable dollar amount. The applicable dollar amount is $95,000
for a taxpayer filing as an individual or head of household and $150,000 for a
taxpayer filing as a married individual filing a joint tax return. The
applicable dollar limit for a taxpayer filing as a married individual filing a
separate return is $0. If your adjusted gross income exceeds the applicable
dollar amount by $15,000 or less ($10,000 or less in the case of a married
individual filing jointly or separately), you may make a contribution to a Roth
IRA. The amount you may contribute, however, will be less than $2,000. Note that
the amount you may contribute to a Roth IRA is not affected by your
participation in an employer-sponsored retirement plan. For this purpose, your
adjusted gross income (1) is determined without regard to the exclusions from
income arising under Section 135 (exclusion of certain savings bond interest),
Section 137 (exclusion of certain employer provided adoption expenses) and
Section 911 (certain exclusions applicable to U.S. citizens or residents living
abroad) of the Code, (2) is reduced by the amount paid under an endowment
contract described in Section 408(b) of the Code which is properly allocated to
the cost of life insurance, (3) takes into account the passive loss limitations
under Section 469 of the Code and any taxable benefits under the Social Security
Act and Railroad Retirement Act as determined in accordance with Section 86 of
the Code, and (4) generally does not take into account income from rollovers
(conversions) of Traditional IRAs. To determine the amount you may contribute to
a Roth IRA (assuming you have at least $2,000 of income), use the following
calculations: (a) Subtract the applicable dollar amount from your adjusted gross
income as determined above. If the result is $15,000 or more ($10,000 or more in
the case of a married individual filing jointly or separately), you cannot make
a contribution to a Roth IRA. (b) Divide the above figure by $15,000 ($10,000 in
the case of a married individual filing jointly or separately), and multiply
that percentage by $2,000. (c) Subtract the dollar amount (result from (b)
above) from $2,000 to determine the amount you may contribute to a Roth IRA. (d)
In addition to the above limits, the amount you may contribute may not exceed
$2,000 reduced by the amount contributed on your behalf to all other individual
retirement accounts. If the contribution limit is not a multiple of $10 it
should be rounded up to the next $10. If you are eligible to make any
contribution, you may make a minimum $200 contribution. Your contribution to a
Roth IRA is not reduced by any amount you contribute to an Education IRA for the
benefit of someone other than yourself. If you are the beneficiary of an
Education IRA, additional limits may apply to you. Please contact your tax
advisor for more information.
4. Can I Roll Over or Transfer Amounts from Other IRAs? You are allowed to "roll
over" a distribution or transfer your assets from one Roth IRA to another
without any tax liability. Rollovers between Roth IRAs are permitted once per
year and must be accomplished within 60 days after the distribution. If you are
a single, head of household or married filing jointly taxpayer and your adjusted
gross income is not more than $100,000, you may roll over amounts from another
individual retirement plan (such as a Traditional IRA) to a Roth IRA. (For this
purpose, adjusted gross income is determined as described above, with the
additional modification that it does not include income generated by the
rollover of a Traditional IRA or, for taxable years beginning after 2004,
amounts attributable to mandatory (i.e., post 701_2) distributions from
Traditional IRAs, which must be removed from the Traditional IRA prior to
conversion.) Rollover amounts (except to the extent they represent
non-deductible contributions) are includable in your income and subject to tax
in the year of the conversion, but such amounts are not subject to the 10%
penalty tax. (A special rule applicable to 1998 conversions is described below.)
However, if an amount rolled over from a Traditional IRA is distributed from the
Roth IRA before the end of the five-tax-year period that begins with the first
day of the tax year in which the rollover is made, a 10% penalty tax will apply.
If you roll over amounts from a Traditional IRA to a Roth IRA during 1998, you
may take advantage of special tax treatment.
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Under the special rules, you may take your rollover into income as if one
quarter of the amount rolled over was distributed to you in 1998 and one quarter
of the amount was distributed to you in each of the following three years.
(However, depending on your particular tax situation, you may elect to take the
entire amount into income in 1998.) For purposes of rollover, you satisfy the
$100,000 adjusted gross income limit if your adjusted gross income does not
exceed $100,000 in 1998 (regardless of subsequent increases). If you die prior
to taking each of the four amounts into income, the remaining amounts are
included in income for the year of your death unless your spouse is your
beneficiary and your spouse elects to take those amounts into the spouse's
income over the remaining period. (If you take distributions from your Roth IRA
before all conversion amounts have been taken into income, you may be required
to include an amount in income earlier than ratably over the four-year period.)
Subject to the foregoing limits, you may also directly convert a Traditional IRA
to a Roth IRA with similar tax results. Furthermore, if you have made
contributions to a Traditional IRA during the year in excess of the deductible
limit, you may convert those nondeductible IRA contributions to contributions to
a Roth IRA (assuming that you otherwise qualify to make a Roth IRA contribution
for the year and subject to the contribution limit for a Roth IRA). You must
report a rollover or conversion from a Traditional IRA to a Roth IRA by filing
Form 8606 as an attachment to your federal income tax return. You may not roll
over amounts to a Roth IRA from a qualified retirement plan or any other
retirement plan that is not an individual retirement plan.
5. What if I Make a Contribution for Which I Am Ineligible or Change My Mind
About the Type of IRA to Which I Wish to Contribute? Prior to the due date
(including extensions) for filing your tax return, you may elect to
"recharacterize" amounts that you contributed to an IRA during the year by
making a trustee-to-trustee transfer of the contributed amount and earnings.
Thus, for example, if you contribute amounts to a Roth IRA and later determine
that you are ineligible to make a Roth IRA contribution for the year, you may at
any time prior to the tax return due date for the year (including extensions)
make a trustee-to-trustee transfer of the contributions and earnings to a
Traditional IRA. The IRS has issued interim rules governing the conversion and
reconversion of amounts from a Traditional IRA to a Roth IRA. These rules are
effective November 1, 1998. Under these rules, if you convert an amount from a
Traditional IRA to a Roth IRA during 1998 and then transfer that amount (plus
earnings) back to a Traditional IRA by means of a trustee-to-trustee transfer,
you may reconvert that amount back into a RothIRA only once more during the
period beginning on November 1, 1998 and ending on December 31, 1998. You also
would be eligible to reconvert that amount and earnings once during 1999. If you
convert an amount from a Traditional IRA to a Roth IRA during 1999 (that has not
been converted previously) and you then transfer that amount plus earnings back
to a Traditional IRA by means of a trustee-to-trustee transfer, you are eligible
to reconvert that amount back to a Roth IRA only once more during 1999. If you
exceed the permissible number of conversions, your taxable conversion amount
will be determined based upon the value of your account as of the date of the
last permissible conversion. As noted above, these rules apply for 1998 and
1999. The IRS may publish additional rules governing the ability of a taxpayer
to convert, recharacterize and reconvert amounts from a Traditional IRA to a
Roth IRA.
6. What if I Make an Excess Contribution? Contributions that exceed the
allowable maximum for federal income tax purposes are treated as "excess
contributions". A nondeductible penalty tax of 6% of the excess amount
contributed will be added to your income tax for each year in which the excess
contribution remains in your account.
7. How Do I Correct an Excess Contribution? If you make a contribution in excess
of your allowable maximum, you may correct the excess contribution and avoid the
6% penalty tax for that year by withdrawing the excess contribution and its
earnings on or before the date, including extensions, for filing your tax return
for the tax year for which the contribution was made. Any earnings on the
withdrawn excess contribution may also be subject to the 10% early distribution
penalty tax if you are under age 591_2. In addition, although you will still owe
penalty taxes for one or more years, excess contributions may be withdrawn after
the time for filing your tax return. Excess contributions for one year may be
carried forward and applied against the contribution limitation in succeeding
years. An individual who is partially or entirely ineligible for a Roth IRA may
transfer amounts of up to $2,000 to a nondeductible Traditional IRA (subject to
reduction for amounts remaining in the Roth IRA and for other Traditional IRA
contributions).
8. When Can I Take Distribution from a Roth IRA? You may at any time request
distribution of all or any portion of your account. However, distributions made
prior to your attainment of age 591_2 (or in some cases within five years of
establishing your account) may produce adverse tax consequences.
9. When Must Distributions from a Roth IRA Begin? Unlike Traditional IRAs, there
is no requirement that you begin distribution of your account during your
lifetime at any particular age.
10. Are There Distribution Rules that Apply after My Death? Your account must be
distributed after your death in accordance with rules similar to those that
apply to distributions from
<PAGE>
a Traditional IRA. As a result, your remaining interest in your Roth IRA will,
at the election of your beneficiary or beneficiaries, (i) be distributed by
December 31 of the year in which occurs the fifth anniversary of your death, or
(ii) commence to be distributed by December 31 of the year following your death
over a period not exceeding the life or life expectancy of your designated
beneficiary or beneficiaries. However, if your spouse is your sole beneficiary,
your spouse may leave your balance in your Roth IRA and treat it as if it were
his or her own (in which case the rules under item (8) above would apply).
11. How Are Distributions from a Roth IRA Taxed for Federal Income Tax Purposes?
Amounts distributed to you are generally excludable from your gross income if
they (i) are paid after you attain age 591_2, (ii) are made to your beneficiary
after your death, (iii) are attributable to your becoming disabled, (iv) subject
to various limits, are made for the purchase of a first home (or for a second or
subsequent home in certain limited cases) for you, your spouse, or your or your
spouse's children, grandchildren, or parents, or (v) are rolled over to another
Roth IRA. Regardless of the foregoing, if you or your beneficiary receive a
distribution within the five-taxable-year period starting with the beginning of
the year to which your initial contribution to your Roth IRA applies, the
earnings on your account are includable in taxable income. In addition, if you
roll over (convert) funds to your Roth IRA from another individual retirement
plan (such as a Traditional IRA or another Roth IRA into which amounts were
rolled from a Traditional IRA), the portion of a distribution attributable to
rolled-over amounts which exceeds the amounts taxed in connection with the
conversion to a Roth IRA is includable in income (and subject to penalty tax) if
it is distributed prior to the end of the five-tax-year period beginning with
the start of the tax year during which the rollover occurred. An amount taxed in
connection with a rollover is subject to a 10% penalty tax if it is distributed
before the end of the five-tax-year period. As noted above, the five-year
holding period requirement is measured from the beginning of the five taxable
year period beginning with the first taxable year for which you (or your spouse)
made a contribution to a Roth IRA on your behalf. Previously, the law required
that a separate five-year holding period apply to regular Roth IRA contributions
and to amounts contributed to a Roth IRA as a result of the rollover or
conversion of a Traditional IRA. Even though the holding period requirement has
been simplified, it may still be advisable to keep regular Roth IRA
contributions and rollover/conversion Roth IRA contributions in separate
accounts. This is because amounts withdrawn from a rollover/conversion Roth IRA
within five years of the rollover/conversion may be subject to a 10 percent
penalty tax. As noted above, a distribution from a Roth IRA that complies with
all of the distribution and holding period requirements is excludable from your
gross income. If you receive a distribution from a Roth IRA that does not comply
with these rules, the part of the distribution that constitutes a return of your
contributions will not be included in your taxable income, and the portion that
represents earnings will be includable in your income. For this purpose, certain
ordering rules apply. Amounts distributed to you are treated as coming first
from your nondeductible contributions. The next portion of a distribution is
treated as coming from amounts which have been rolled over (converted) from any
non-Roth IRAs in the order such amounts were rolled over. Any remaining amounts
(including all earnings) are treated as distributed last. Any portion of your
distribution which does not meet the criteria for exclusion from gross income
may also be subject to a 10% penalty tax. Note that to the extent a distribution
would be taxable to you, neither you nor anyone else can qualify for capital
gains treatment for amounts distributed from your account. Similarly, you are
not entitled to the special five- or ten-year averaging rule for lump-sum
distributions that may be available to persons receiving distributions from
certain other types of retirement plans. Rather, the taxable portion of any
distribution is taxed to you as ordinary income. Your Roth IRA is not subject to
taxes on excess distributions or on excess amounts remaining in your account as
of your date of death. You must indicate on distribution requests whether or not
federal income taxes should be withheld on the taxable portion (if any) of a
distribution from a Roth IRA. Redemption requests not indicating an election not
to have federal income tax withheld will be subject to withholding with respect
to the taxable portion (if any) of a distribution. Note that, for federal tax
purposes (for example, for purposes of applying the ordering rules described
above), Roth IRAs are considered separately from Traditional IRAs.
12. Are There Penalties for Early Distribution from a Roth IRA? As indicated
above, earnings on your contributions, as well as amounts contributed to a Roth
IRA as a rollover from a Traditional IRA, that are distributed before certain
events are subject to various taxes.
13. What if I Engage in a Prohibited Transaction? If you engage in a "prohibited
transaction," as defined in Section 4975 of the Internal Revenue Code, your
account could lose its tax-favored status. Examples of prohibited transactions
are: (a) the sale, exchange, or leasing of any property between you and your
account, (b) the lending of money or other extensions of credit between you and
your account, (c) the furnishing of goods, services, or facilities between you
and your account.
14. What if I Pledge My Account? If you use (pledge) all or part of your Roth
IRA as security for a loan, your account may lose its tax-favored status.
15. How Are Contributions to a Roth IRA Reported for Federal Tax Purposes? You
must file From 5329 with the IRS to report and remit any penalties or excise
taxes. In addition, certain contribution and
<PAGE>
distribution information must be reported to the IRS on Form 8606 (as an
attachment to your federal income tax return).
16. How Are Earnings on My Account Calculated and Allocated? The method of
computing and allocating annual earnings is set forth in the Roth Individual
Retirement Account Custodial Agreement. The growth in value of your IRA is
neither guaranteed nor projected.
17. Is There Anything Else I Should Know? Your Roth Individual Retirement
Account Plan has been approved as to form by the Internal Revenue Service. The
Internal Revenue Service approval is a determination only as to the form of the
Plan and does not represent a determination of the merits of the Plan as adopted
by you. You may obtain further information with respect to your Roth Individual
Retirement Account from any district office of the Internal Revenue Service. The
statute provides that Roth IRAs are to be treated the same as Traditional IRAs
for most purposes. As the IRS clarifies its interpretation of the statute,
revised or updated information will be provided. Roth Individual Retirement
Custodial Account The following constitutes an agreement establishing a Roth IRA
(under Section 408A of the Internal Revenue Code) between the depositor and the
custodian.
Article I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except in
the case of a rollover contribution described in Section 408A(e), the custodian
will accept only cash contributions and only up to a maximum amount of $2,000
for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will be
accepted.
Article II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married depositor who files separately, between $0 and $10,000. In the
case of a conversion, the custodian will not accept IRA Conversion Contributions
in a tax year if the depositor's AGI for that tax year exceeds $100,000 or if
the depositor is married and files a separate return. Adjusted gross income is
defined in Section 408A(c)(3) and does not include IRA Conversion Contributions.
Article III
The depositor's interest in the balance in the custodial account is
nonforfeitable.
Article IV
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
Section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of Section 408(m) except as otherwise permitted by Section 408(m)(3),
which provides an exception for certain gold, silver, and platinum coins, coins
issued under the laws of any state, and certain bullion.
Article V
1. If the depositor dies before his or her entire interest is distributed to him
or her and the grantor's surviving spouse is not the sole beneficiary, the
entire remaining interest will, at the election of the depositor or, if the
depositor has not so elected, at the election of the beneficiary or
beneficiaries, either: (a) Be distributed by December 31 of the year containing
the fifth anniversary of the depositors death, or (b) Be distributed over the
life expectancy of the designated beneficiary starting no later than December 31
of the year following the year of the depositor's death. If distributions do not
begin by the date described in (b), distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the minimum
annual payment for each year, divide the grantor's entire interest in the trust
as of the close of business on December 31 of the preceding year by the life
expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the depositor's date of
death, such spouse will then be treated as the depositor.
Article VI
1. The depositor agrees to provide the custodian with information necessary for
the custodian to prepare any reports required under Section 408(i) and
408A(d)(3)(E), regulations Sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal Revenue Service and
the depositor prescribed by the Internal Revenue Service.
Article VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this
<PAGE>
sentence will be controlling. Any additional articles that are not consistent
with Section 408A, the related regulations, and other published guidance will be
invalid.
Article VIII
This Agreement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other amendments
may be made with the consent of the persons whose signatures appear below.
Article IX
1. Investment of Account Assets.
(a) All contributions to the custodial account shall be invested in the shares
of any regulated investment company ("Investment Company") for which T.O.
Richardson Company, Inc. serves as Investment Advisor, or any other regulated
investment company designated by the Investment Advisor. Shares of stock of an
Investment Company shall be referred to as "Investment Company Shares." (b) Each
contribution to the custodial account shall identify the depositor's account
number and be accompanied by a signed statement directing the investment of that
contribution. The custodian may return to the depositor, without liability for
interest thereon, any contribution which is not accompanied by adequate account
identification or an appropriate signed statement directing investment of that
contribution. (c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are offered
to the public. All distributions received on Investment Company Shares held in
the custodial account shall be reinvested in like shares. If any distribution of
Investment Company Shares may be received in additional like shares or in cash
or other property, the custodian shall elect to receive such distribution in
additional like Investment Company Shares. (d) All Investment Company Shares
acquired by the custodian shall be registered in the name of the custodian or
its nominee. The depositor shall be the beneficial owner of all Investment
Company Shares held in the custodial account and the custodian shall not vote
any such shares, except upon written direction of the depositor. The custodian
agrees to forward to the depositor each prospectus, report, notice, proxy and
related proxy soliciting materials applicable to Investment Company Shares held
in the custodial account received by the custodian. (e) The depositor may, at
any time, by written notice to the custodian, redeem any number of shares held
in the custodial account and reinvest the proceeds in the shares of any other
Investment Company. Such redemptions and reinvestments shall be done at the
price and in the manner such shares are then being redeemed or offered by the
respective Investment Companies.
2. Amendment and Termination. (a) The custodian may amend the Custodial Account
(including retroactive amendments) by delivering to the depositor written notice
of such amendment setting forth the substance and effective date of the
amendment. The depositor shall be deemed to have consented to any such amendment
not objected to in writing by the depositor within thirty (30) days of receipt
of the notice, provided that no amendment shall cause or permit any part of the
assets of the custodial account to be diverted to purposes other than for the
exclusive benefit of the depositor or his or her beneficiaries. (b) The
depositor may terminate the custodial account at any time by delivering to the
custodian a written notice of such termination. (c) The custodial account shall
automatically terminate upon distribution to the depositor or his or her
beneficiaries of its entire balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes levied or assessed
upon or in respect of the assets or income of the custodial account and any
transfer taxes incurred shall be paid from the custodial account. All
administrative expenses incurred by the custodian in the performance of its
duties, including fees for legal services rendered to the custodian, and the
custodian's compensation shall be paid from the custodial account, unless
otherwise paid by the depositor or his or her beneficiaries. The custodian's
fees are set forth in a schedule provided to the depositor. Extraordinary
charges resulting from unusual administrative responsibilities not contemplated
by the schedule will be subject to such additional charges as will reasonably
compensate the custodian. Fees for refund of excess contributions, transferring
to a successor trustee or custodian, or redemption/reinvestment of Investment
Company Shares will be deducted from the refund or redemption proceeds and the
remaining balance will be remitted to the depositor, or reinvested or
transferred in accordance with the depositor's instructions.
4. Reports and Notices. (a) The custodian shall keep adequate records of
transactions it is required to perform hereunder. After the close of each
calendar year, the custodian shall provide to the depositor or his or her legal
representative a written report or reports reflecting the transactions effected
by it during such year and the assets and liabilities of the Custodial Account
at the close of the year. (b) All communications or notices shall be deemed to
be given upon receipt by the custodian at 615 E. Michigan St., Milwaukee, WI
53202 or the depositor at his most recent address shown in the custodian's
records. The depositor agrees to advise the custodian promptly, in writing, of
any change of address.
5. Designation of Beneficiary. The depositor may designate a beneficiary or
beneficiaries to receive benefits from the custodial account in the event of the
depositor's death. In the event the depositor has not designated a beneficiary,
or if all beneficiaries shall predecease the
<PAGE>
depositor, the following persons shall take in the order named:
(a) The spouse of the depositor;
(b) If the spouse shall predecease the depositor or if the depositor does not
have a spouse, then to the personal representative of the depositor's estate.
6. Inalienability of Benefits. The benefits provided under this custodial
account shall not be subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind and any attempt to cause such benefits to be so
subjected shall not be recognized except to the extent as may be required by
law.
7. Rollover Contributions and Transfers. Subject to the restrictions in Article
I, the custodian shall have the right to receive rollover contributions and to
receive direct transfers from other custodians or trustees. All contributions
must be made in cash or check.
8. Conflict in Provisions. To the extent that any provisions of this Article
VIII shall conflict with the provisions of Articles V, VI and/or VIII, the
provisions of this Article IX shall govern.
9. Applicable State Law. This custodial account shall be construed, administered
and enforced according to the laws of the State of Wisconsin.
Individual Retirement Account Disclosure Statement For Education IRAs
1. Who is Eligible for an Education IRA? Anyone may contribute to an Education
IRA regardless of his or her relationship to the beneficiary. The beneficiary of
an Education IRA must be under age 18 at the time a contribution is made to an
Education IRA on his or her behalf. An Education IRA may also be established to
receive rollover contributions or transfers from another Education IRA.
Education IRAs are subject to limitations based on the status of the contributor
as well as the status of the beneficiary. For purposes of this discussion,
except as noted, the term "beneficiary" is used to refer to an individual whose
education is to be financed, in part or in whole, through an Education IRA.
2. When Can I Make Contributions to an Education IRA? You may make contributions
to an Education IRA for the calendar year regardless of your age; however, you
may not make a contribution to an Education IRA after the beneficiary attains
age 18. In addition, as discussed below, a beneficiary may roll over
contributions to another Education IRA until he or she attains age 30. A
beneficiary may also roll over his or her Education IRA to a new beneficiary in
his or her family so long as the recipient has not attained age 30.
3. How Much May I Contribute to an Education IRA? The total of all contributions
made to all Education IRAs that cover a particular beneficiary may not exceed
$500 in a taxable year. It is the joint responsibility of the contributor and
the beneficiary to verify that excess contributions are not made on behalf of a
particular beneficiary. Qualifying rollover contributions and transfers are not
subject to these limitations. Note that special rules apply to contributions to
Education IRAs for purposes of gift and estate taxes. In addition, if your
adjusted gross income (or combined income if you file a joint tax return) as
modified below exceeds certain limits, you are not eligible to make a
contribution to an Education IRA. For this purpose your adjusted gross income is
increased by amounts excluded under Section 911 (certain exclusions applicable
to U.S. citizens or residents living abroad), Section 931 (certain exclusions
applicable to U.S. citizens or residents living in Guam, American Samoa, or the
Northern Mariana Islands), and Section 933 (certain exclusions applicable to
U.S. citizens and residents living in Puerto Rico) of the Code. The amount you
may contribute to an Education IRA for a particular beneficiary is reduced
proportionately for adjusted gross income (as modified above) which exceeds the
applicable dollar amount. The applicable dollar amount is $95,000 for an
individual, a married individual filing a separate tax return, or a head of
household and $150,000 for a married individual filing a joint tax return.
(These amounts are not adjusted for cost-of-living changes or otherwise.) If
your adjusted gross income as modified above exceeds the applicable dollar
amount by $15,000 or less ($10,000 or less in the case of a married individual
filing jointly), you may make a contribution to an Education IRA. The amount you
may contribute, however, will be less than $500. To determine the amount you may
contribute to an Education IRA, use the following calculations: (a) Subtract the
applicable dollar amount from your adjusted gross income as modified above. If
the result is $15,000 or more ($10,000 or more in the case of a married
individual filing jointly), you may not make a contribution to an Education IRA.
(b) Divide the above figure by $15,000 ($10,000 in the case of a married
individual filing jointly), and multiply that percentage by $500. (c) Subtract
the dollar amount (result from (b) above) from $500 to determine the amount that
you may contribute to an Education IRA. In addition to the limitations described
above, the $500 may be reduced by other amounts contributed to an individual
retirement plan for the benefit of a particular beneficiary, but is not affected
by the adjusted gross income of the beneficiary. If the beneficiary of the
Education IRA also maintains a Traditional or Roth IRA, his or her overall
contributions to other
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individual retirement plans may be limited. Please contact your tax advisor for
more information.
4. Can I Roll Over or Transfer Amounts from Another Education IRA? Amounts
may be "rolled over" from one Education IRA to another Education IRA benefiting
the same beneficiary. In addition, amounts may be rolled over without any tax
liability to benefit any of the following individuals provided that they have
not attained age 30 at the time of the rollover: (i) the spouse of the
beneficiary, (ii) an ancestor of the beneficiary, (iii) a descendant of the
beneficiary, of the beneficiary's parents, or of the beneficiary's spouse, or
(iv) the spouse of a lineal descendant of an individual described in (iii).
Rollovers between Education IRAs may be made once per year and must be
accomplished within 60 days after the distribution.
5. What if I Make an Excess Contribution? Contributions that exceed the
allowable maximum for federal income tax purposes are treated as excess
contributions. A nondeductible penalty tax of 6% of the excess amount
contributed must be paid for each year in which the excess contribution remains
in the beneficiary's account.
6. How Do I Correct an Excess Contribution? If a contribution in excess of the
allowable maximum is made, it may be corrected to avoid the 6% penalty tax for
that year by withdrawing the excess contribution and its earnings on or before
the date, including extensions, for filing the tax return for the beneficiary's
tax year for which the contribution was made. Any earnings on the withdrawn
excess contribution will be taxable in the year the excess contribution was made
and will be subject to a 10% tax penalty.
7. What Forms of Distribution Are Available from an Education IRA? Distributions
may be made as a lump sum of the entire account, or distributions of a portion
of the account may be made as requested.
8. When Must Distributions from an Education IRA Begin? Distribution of an
Education IRA must be made (or otherwise will be deemed made) no later than 30
days of the earlier of the beneficiary's death or attainment of age 30. A
distribution from an Education IRA may be rolled over to another beneficiary's
Education IRA according to the requirements of Section (4).
9. Are There Distribution Rules That Apply After Death? Special rules apply in
the case of the divorce or death of a beneficiary of an Education IRA. In
particular, any balances to the credit of a beneficiary must, within 30 days of
death, be either: (i) rolled over to another beneficiary's Education IRA
according to the requirements of Section (4) (in which case the distribution
will not be subject to tax) or (ii) distributed to a death beneficiary or the
beneficiary's estate (in which case the distribution will be subject to tax).
10. How Are Distributions from an Education IRA Taxed For Federal Income Tax
Purposes? Amounts distributed are generally excludable from gross income if they
do not exceed the beneficiary's "qualified higher education expenses" for the
year or are rolled over to another Education IRA according to the requirements
of Section (4). "Qualified higher education expenses" generally include the cost
of tuition, fees, books, supplies, and equipment for enrollment at (i)
accredited post-secondary educational institutions offering credit toward a
bachelor's degree, an associate's degree, a graduate-level or professional
degree or another recognized post-secondary credential and (ii) certain
vocational schools. In addition, room and board may be covered if the
beneficiary is at least a "half-time" student. This amount may be reduced or
eliminated by certain scholarships, qualified state tuition programs, HOPE,
Lifetime Learning tax credits, proceeds of certain savings bonds, and other
amounts paid on the beneficiary's behalf as well as by any other deductions or
credits taken for the same expenses. To the extent payments during the year
exceed such amounts, they are partially taxable and partially nontaxable similar
to payments received from an annuity. Any taxable portion of a distribution is
generally subject to a 10% penalty tax in addition to income tax unless the
distribution is (i) due to the death or disability of the beneficiary, (ii) made
on account of scholarship received by the beneficiary, or (iii) is made in a
year in which the beneficiary elects the HOPE or Lifetime Learning credit and
waives the exclusion from income of the Education IRA distribution. To the
extent a distribution is taxable, capital gains treatment does not apply to
amounts distributed from the account. Similarly, the special five- and ten-year
averaging rules for lump-sum distributions do not apply to distributions from an
Education IRA. The taxable portion of any distribution is taxed as ordinary
income. The IRS does not require withholding on distributions from Education
IRAs.
11. What if a Prohibited Transaction Occurs? If a "prohibited transaction," as
defined in Section 4975 of the Internal Revenue Code, occurs, the Education IRA
could be disqualified. Rules similar to those that apply to Traditional IRAs
will apply.
12. What if the Education IRA is Pledged? If all or part of the Education IRA is
pledged as security for a loan, rules similar to those that apply to Traditional
IRAs will apply. In general, those rules provide that the amount pledged is
treated as distributed.
13. How Are Contributions to an Education IRA Reported for Federal Tax Purposes?
As of the date of this Disclosure Statement, the Internal Revenue Service had
not issued forms for reporting information related to contributions to and
distributions from an Education IRA.
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14. How Are Earnings on an Education IRA Calculated and Allocated? The method of
computing and allocating annual earnings is expected to be set forth in an IRS
pre-approved Education Individual Retirement Account Custodial Agreement. The
growth in value of the IRA is neither guaranteed nor projected.
15. Is There Anything Else I Should Know? As the IRS clarifies its
interpretation of the Education IRA provisions of the Code, revised or updated
information will be provided to you. Education Individual Retirement Custodial
Account The depositor whose name appears above is establishing an education
individual retirement custodial account under Section 530 for the benefit of the
designated beneficiary whose name appears above exclusively to pay for the
qualified higher education expenses, within the meaning of Section 530(b)(2), of
such designated beneficiary. The custodian named above has provided the
depositor with a concise statement disclosing the provisions governing Section
530. This disclosure statement must include an explanation of the statutory
requirements applicable to, and the income tax consequences of establishing and
maintaining an account under, Section 530. Providing the depositor with a copy
of Notice 97-60, 1997-46 I.R.B. 8 (November 17, 1997) is considered a sufficient
disclosure statement. The custodian also will provide a copy of this form and
the disclosure statement to the responsible individual, as defined in Article VI
below, if the responsible individual is not the same person as the depositor.
The depositor and the custodian make the following agreement:
Article I
The custodian may accept additional cash contributions. These contributions may
be from the depositor, or from any other individual, for the benefit of the
designated beneficiary, provided the designated beneficiary has not attained the
age of 18 as of the date such contributions are made. Total contributions that
are not rollover contributions described in Section 530(d)(5) are limited to a
maximum amount of $500 for the taxable year.
Article II
The maximum aggregate contribution that an individual may make to the custodial
account in any year may not exceed the $500 in total contributions that the
custodial account can receive. In addition, the maximum aggregate contribution
that an individual may make to the custodial account in any year is phased out
for unmarried individuals who have modified adjusted gross income (AGI) between
$95,000 and $110,000 for the year of the contribution and for married
individuals who file joint returns with modified AGI between $150,000 and
$160,000 for the year of the contribution. Unmarried individuals with modified
AGI above $110,000 for the year and married individuals who file joint returns
and have modified AGI above $160,000 for the year may not make a contribution
for that year. Modified AGI is defined in Section 530(c)(2).
Article III
No part of the custodial account funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common investment fund (within the meaning of Section
530(b)(1)(D)).
Article IV
1. Any balance to the credit of the designated beneficiary on the date on which
such designated beneficiary attains age 30 shall be distributed to the
designated beneficiary within 30 days of such date.
2. Any balance to the credit of the designated beneficiary shall be distributed
to the estate of the designated beneficiary within 30 days of the date of such
designated beneficiary's death.
Article V
The depositor shall have the power to direct the custodian regarding the
investment of the above-listed amount assigned to the custodial account
(including earnings thereon) in the investment choices offered by the custodian.
The responsible individual, however, shall have the power to redirect the
custodian regarding the investment of such amounts, as well as the power to
direct the custodian regarding the investment of all additional contributions
(including earnings thereon) to the custodial account. In the event that the
responsible individual does not direct the custodian regarding the investment of
additional contributions (including earnings thereon), the initial investment
direction of the depositor also will govern all additional contributions made to
the custodial account until such time as the responsible individual otherwise
directs the custodian. Unless otherwise provided in this agreement, the
responsible individual also shall have the power to direct the custodian
regarding the administration, management, and distribution of the account.
Article VI
The "responsible individual" named by the depositor shall be a parent or
guardian of the designated beneficiary. The custodial account shall have only
one responsible individual at any time. If the responsible individual becomes
incapacitated or dies while the designated beneficiary is a minor under state
law, the successor responsible individual shall be the person named to succeed
in that capacity by the preceding responsible individual in a witnessed writing
or, if no successor is so named, the successor responsible individual shall be
the designated beneficiary's other parent or successor guardian. Unless
otherwise directed by checking the option below, at the time that the designated
beneficiary attains the age of majority under state law, the designated
beneficiary becomes the responsible individual. _____ Option (This provision is
effective only if checked): The responsible individual shall continue to serve
as the responsible individual for the custodial account after the designated
beneficiary attains the age of majority under state law and
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until such time as all assets have been distributed from the custodial account
and the custodial account terminates. If the responsible individual becomes
incapacitated or dies after the designated beneficiary reaches the age of
majority under state law, the responsible individual shall be the designated
beneficiary.
Article VII
The responsible individual _____ may or _____ may not
change the beneficiary designated under this agreement to another member of the
designated beneficiary's family described in Section 529(e)(2) in accordance
with the custodian's procedures.
Article VIII
1. The depositor agrees to provide the custodian with the information necessary
for the custodian to prepare any reports required under Section 530(h).
2. The custodian agrees to submit reports to the Internal Revenue Service and
the responsible individual as prescribed by the Internal Revenue Service.
Article IX
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV will be controlling. Any additional articles
that are not consistent with Section 530 and related regulations will be
invalid.
Article X
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the depositor and the custodian whose signatures appear below.
Article XI
1. Investment of Account Assets. (a) All contributions to the custodial account
shall be invested in the shares of any regulated investment company ("Investment
Company") for which T.O. Richardson Company, Inc. serves as Investment Advisor,
or any other regulated investment company designated by the Investment Advisor.
Shares of stock of an Investment Company shall be referred to as "Investment
Company Shares." (b) Each contribution to the custodial account shall identify
the designated beneficiary's account number and shall be accompanied by a signed
statement directing the investment of that contribution into the designated
beneficiary's account. The custodian may return to the contributor, without
liability for interest thereon, any contribution which is not accompanied by
such information and such appropriate signed statement directing investment of
that contribution. (c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are offered
to the public. All distributions received on Investment Company Shares held in
the custodial account shall be reinvested in like shares. If any distribution of
Investment Company Shares may be received in additional like shares or in cash,
the custodian shall elect to receive such distribution in additional like
Investment Company Shares. (d) All Investment Company Shares acquired by the
custodian shall be registered in the name of the custodian or its nominee. The
designated beneficiary shall be the beneficial owner of all Investment Company
Shares held in the custodial account and the custodian shall not vote any such
shares, except upon written direction of the responsible individual. The
custodian agrees to forward to the responsible individual each prospectus,
report, notice, proxy and related proxy soliciting materials applicable to
Investment Company Shares held in the custodial account received by the
custodian. (e) The responsible individual may, at any time, by written notice to
the custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner such
shares are then being redeemed or offered by the respective Investment
Companies. (f) To the extent a responsible individual for the designated
beneficiary makes or has power to make decisions as to the investment of the
designated beneficiary's account, that party acknowledges that such decisions
are binding and nonvoidable.
2. Amendment and Termination (a) The custodian may amend the Custodial Account
(including retroactive amendments) by delivering to the responsible individual
written notice of such amendment setting forth the substance and effective date
of the amendment. The responsible individual shall be deemed to have consented
to any such amendment not objected to in writing by the responsible individual
within thirty (30) days of receipt of the notice, provided that no amendment
shall cause or permit any part of the assets of the custodial account to be
diverted to purposes other than for the exclusive benefit of the designated
beneficiary. (b) The responsible individual may terminate the custodial account
at any time by delivering to the custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon distribution to the
designated beneficiary or his or her estate of its entire balance.
3. Taxes and Custodial Fees Any income taxes or other taxes levied or assessed
upon or in respect of the assets or income of the custodial account and any
transfer taxes incurred shall be paid from the custodial account. All
administrative expenses incurred by the custodian in the performance of its
duties, including fees for legal services rendered to the custodian, and the
custodian's compensation shall be paid from the custodial account, unless
otherwise paid by the beneficiary or his or her estate. The custodian's fees are
set forth in a schedule provided to the responsible individual. Extraordinary
charges resulting from unusual administrative responsibilities not contemplated
by the schedule will be subject to such additional charges as will
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reasonably compensate the custodian. Fees for refund of excess contributions,
transferring to a successor trustee or custodian, or redemption /reinvestment of
Investment Company Shares will be deducted from the refund or redemption
proceeds and the remaining balance will be remitted to the designated
beneficiary, or reinvested or transferred in accordance with the responsible
individual's instructions.
4. Reports and Notices (a) The custodian shall keep adequate records of
transactions it is required to perform hereunder. After the close of each
calendar year, the custodian shall provide to the responsible individual a
written report or reports reflecting the transactions effected by it during such
year and the assets and liabilities of the Custodial Account at the close of the
year. (b) All communications or notices shall be deemed to be given upon receipt
by the custodian at 615 E. Michigan St., Milwaukee, WI 53202 or the responsible
individual at his most recent address shown in the custodian's records. The
responsible individual agrees to advise the custodian promptly, in writing, of
any change of address.
5. Monitoring of Contribution Limitations Information The custodian shall not be
responsible for monitoring the amount of contributions made to the designated
beneficiary's account or the income levels of any depositor or contributor for
purposes of assuring compliance with applicable state or federal tax laws.
6. Inalienability of Benefits The benefits provided under this custodial account
shall not be subject to alienation, assignment, garnishment, attachment,
execution or levy of any kind and any attempt to cause such benefits to be so
subjected shall not be recognized except to the extent as may be required by
law. However, the responsible individual may change the designated beneficiary
under the agreement to another member of the designated beneficiary's family
described in Internal Revenue Code Section 529(e)(2) in accordance with the
custodian's procedures.
7. Rollover Contributions and Transfers The custodian shall have the right to
receive rollover contributions and to receive direct transfers from other
custodians or trustees. All contributions must be made in cash or check.
8. Conflict in Provisions To the extent that any provisions of this Article XI
on the Education IRA Application shall conflict with the provisions of Articles
V through VIII or X, the provisions of this Article XI shall govern.
9. Applicable State Law This custodial account shall be construed, administered
and enforced according to the laws of the State of Wisconsin.
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