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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
-------
Post-Effective Amendment No. 24 /X/
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT / /
OF 1940
Amendment No. 25 /X/
--------
(Check appropriate box or boxes.)
THE FAIRMONT FUND TRUST (formerly The Fairmont Fund)
FILE NOS. 2-70825 and 811-3139
(Exact Name of Registrant as Specified in Charter)
1346 South Third Street, Louisville, Kentucky 40208
- -------------------------------------------------------------------
(Address of Principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code: (502) 636-5633
---------------
Morton H. Sachs, 1346 South Third Street, Louisville, Kentucky 40208
- -----------------------------------------------------------------------
(Name and Address of Agent for Service)
With copy to:
Donald S. Mendelsohn, Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower, 441 Vine Street, Cincinnati, Ohio 45202
Release Date: May 1, 1998
It is proposed that this filing will become effective:
/X/ immediately upon filing pursuant to paragraph (b)
/ / on _____________ pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered
----------------------------
Omit from the facing sheet reference to the other Act if the
Registration Statement or amendment is filed under only one of the Acts. Include
the "Approximate Date of Proposed Public Offering" and "Title of Securities
Being Registered" only where securities are being registered under the
Securities Act of 1933.
2
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THE FAIRMONT FUND
CROSS REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM SECTION IN PROSPECTUS
- ---- ---------------------
<S> <C>
1.............................. Cover Page
2.............................. Fund Expenses
3.............................. Financial Highlights, Performance Information
4.............................. Operation of The Trust, Investment Objective, Strategy and Risk Factors,
Investment Techniques
5.............................. Operation of The Trust, Financial Highlights
5A............................. Operation of The Trust
6.............................. Investment Techniques, How to Withdraw (Redeem) an Investment, Cover
Page, Dividends, Distributions and Taxes
7.............................. How to Invest in The Fund, Determination of Net Asset Value, Operation
of The Trust
8.............................. How to Withdraw (Redeem) an Investment
9.............................. None
14.............................. The Trustees and Executive Officers
16.............................. The Trustees and Executive Officers
SECTION IN STATEMENT OF
ITEM ADDITIONAL INFORMATION
10.............................. Cover Page
11.............................. Table of Contents
12.............................. None
13.............................. Investment Policies, Other Restrictions, U.S. Government Obligations
14.............................. Trustee Compensation
15.............................. Description of The Trust
16.............................. Investment Advisory Agreement, Custodian, Auditors, Transfer Agent
17.............................. Portfolio Transactions and Brokerage
18.............................. Description of The Trust
19.............................. Determination of Net Asset Value
20.............................. Taxes
21.............................. None
22.............................. Performance Information
23.............................. Independent Auditors Report, Financial Statements
</TABLE>
3
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THE FAIRMONT FUND
1346 South Third Street
Louisville, Kentucky 40208
(502) 636-5633
(800) 262-9936
PROSPECTUS
May 1, 1998
The Fairmont Fund (The Fund) is a no-load, diversified series of The
Fairmont Fund Trust (The Trust), an open-end investment company seeking capital
appreciation by investing in equity securities that the Adviser of The Trust
believes are undervalued.
This prospectus sets forth concisely the information about The Fund
that you ought to know before investing. Please retain this prospectus for
future reference. A Statement of Additional Information dated May 1, 1998 has
been filed with the Securities and Exchange Commission (SEC) and is hereby
incorporated by reference in its entirety. A copy of the Statement can be
obtained at no charge by calling the number listed above. The SEC maintains a
web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
registrants that file electronically with the SEC.
For information or assistance, write to The Fund at the address listed
above or call The Fund at the number listed above.
You should read and retain this prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
-----------------
PAGE
----
FUND EXPENSES.......................................................... 3
FINANCIAL HIGHLIGHTS................................................... 3
PERFORMANCE INFORMATION................................................ 4
PORTFOLIO.............................................................. 7
INVESTMENT OBJECTIVE, STRATEGY AND RISK FACTORS........................ 9
HOW TO INVEST IN THE FUND.............................................. 9
Investments by Mail........................................... 10
Investments by Wire........................................... 10
Other Purchase Information.................................... 10
Tax Sheltered Retirement Plans................................ 10
HOW TO WITHDRAW (REDEEM) AN INVESTMENT................................. 11
OPERATION OF THE TRUST................................................. 12
DETERMINATION OF NET ASSET VALUE....................................... 12
DIVIDENDS, DISTRIBUTIONS AND TAXES..................................... 13
Dividends and Distributions................................... 13
Taxes......................................................... 13
INVESTMENT TECHNIQUES.................................................. 14
Foreign Securities............................................ 14
Repurchase Agreements......................................... 14
General....................................................... 15
2
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FUND EXPENSES
The following table illustrates all expenses and fees that a
shareholder of The Fund will incur. The operating expense information is based
upon operating expenses for the fiscal year ended December 31, 1997, expressed
as a percentage of average daily net assets.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases...................... None
Sales Load Imposed on Reinvested Dividends........... None
Redemption Fees...................................... None
Annual Fund Operating Expenses
Management Fees...................................... 1.63%
12b-1 Fees........................................... None
Other Expenses....................................... None
Total Fund Operating Expenses........................ 1.63%
Example
You would pay the following expenses on 1 year 3 years 5 years 10 years
------ ------- ------- --------
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $17 $52 $89 $194
The purpose of the table above is to assist shareholders in
understanding the costs and expenses that shareholders in The Fund will bear
directly or indirectly. The Fund's Adviser pays all of the operating expenses of
The Fund. For a more complete description of The Fund's expenses and its
management fee structure, see "Operation of The Trust." The Example should not
be considered a representation of past or future expenses and actual expenses
may be greater or lesser than those shown.
Shareholders should note that The Fund is a no-load fund and has no
distribution expense plan. Accordingly, a shareholder does not pay any sales
charge or commission upon purchase or redemption of shares of The Fund and does
not pay any expenses with respect to the distribution of the shares of The Fund.
FINANCIAL HIGHLIGHTS
The following condensed financial information for The Fairmont Fund is
derived from The Fund's financial statements. The financial statements for the
years ended December 31, 1992 through 1997 have been audited by McCurdy &
Associates CPA's, Inc., independent auditors. The financial statements for the
remaining periods have been audited by other independent auditors whose reports
for those years were unqualified. The financial statements of The Fund for the
year ended December 31, 1997 and the independent auditors' report thereon are
3
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included in the Statement of Additional Information. The Fund's Annual Report
contains additional performance information and will be made available upon
request and without charge.
For a share outstanding throughout each period (a):
<TABLE>
<CAPTION>
Years Ended
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
31 31 31 31 31 31 31 31 31 31
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 26.45 $27.02 $24.06 $22.43 $ 19.41 $ 17.02 $ 12.17 $ 16.02 $ 15.19 $ 14.9
Income From Investment
Operations
Net Investment Income (.16) (.10) (.08) (.16) (.14) (.17) .09 .30 .21 .24
Net Gains or Losses on
Securities (both realized
and unrealized) 4.20 2.67 6.80 1.79 3.16 2.56 4.85 (3.85) .83 .23
Total From Investment
Operations 4.04 2.57 6.72 1.63 3.02 2.39 4.94 (3.55) 1.04 .47
Less Distributions
Dividends (from net
investment income) .00 .00 .00 .00 .00 .00 .09 .30 .21 .24
Distributions (from
capital gains) 2.81 3.14 3.76 .00 .00 .00 .00 .00 .00 .00
Returns of Capital .00 .00 .00 .00 .00 .00 .00 .00 .00
Total Distributions 2.81 3.14 3.76 .00 .00 .00 .09 .30 .21 .24
Net Asset Value, End
of Period $ 27.68 $26.45 $27.02 24.06 22.43 19.41 17.02 12.17 16.02 15.19
Total Return 15.27 9.52 27.92 7.27 15.56 14.04 40.56 (22.13) 6.84 3.12
Ratios/Supplemental Data
Net Assets, End of
Period (in 000s) $31,856 $30,731 $28,191 22,195 18,884 16,788 17,385 15,859 42,511 64,145
Ratio of Expenses to
Average Net Assets 1.63% 1.66% 1.70% 1.74% 1.78% 1.79% 1.79% 1.68% 1.37% 1.25%
Ratio of Net Income to
Average Net Assets (.57)% (.59)% (.55)% (.79)% (.66)% (.85)% .51% 1.53% 1.01% 1.30%
Portfolio Turnover Rate 1.83 2.37 2.47 2.75 1.55 1.32 1.15 1.28% .90% 1.58%
Average Commission .057 .057
</TABLE>
(a) All per share amounts have been restated to reflect a
three-for-one share split which became effective February 15,
1990.
PERFORMANCE INFORMATION
Average Annual Total Return. From time to time, The Fund advertises its
"average annual total return" for one, five and ten year periods, and for the
period since inception (September 2, 1981). Average annual total return figures
are based on historical performance and are not intended to indicate future
performance. The "total return" of The Fund refers to the dividends and
distributions generated by an investment in The Fund plus the change in the
4
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value of the investment from the beginning of the period to the end of the
period. The "average annual total return" of The Fund refers to the rate of
total return for each year of the period which, when compounded over the period,
would be equivalent to the cumulative total return for the period. The dividends
and distributions earned on the investment are assumed to be reinvested. The
dividends and distributions and the principal value of an investment in The Fund
will fluctuate so that a shareholder's shares, when redeemed, may be worth more
or less than the shareholder's original investment.
AVERAGE ANNUAL TOTAL RETURN:
For the one year period ended December 31, 1997..........................15.27%
For the five year period ended December 31, 1997.........................14.89%
For the ten year period ended December 31, 1997 .........................10.66%
For the period since inception as of December 31, 1997...................13.66%
Other Performance Information. From time to time The Fund also
advertises its rates of total return for specified periods, including the period
from September 2, 1981 (date of initial public offering of shares), through a
specified month end. It also advertises the value of a $10,000 investment made
on September 2, 1981, as of a specified month end.
<TABLE>
<CAPTION>
Year End Value of
Net Asset Dividends $10,000 Total Return
Year Ended Value(a) Paid (a) Investment (b) One Year Since Inception (c)
- ---------- -------- --------- -------------- -------- -------------------
<C> <C> <C> <C> <C> <C>
12/31/81(c) $ 8.74 $ .00 $10,484 4.84%(c) 4.84%
12/31/82 11.02 .60 14,072 34.23% 40.72%
12/31/83 14.07 .74 19,093 35.68% 90.93%
12/31/84 14.76 .74 21,148 10.76% 111.48%
12/31/85 18.08 1.18 27,940 32.12% 179.40%
12/31/86 16.50 4.05 31,865 14.05% 218.65%
12/31/87 14.96 .26 29,388 -7.77% 193.88%
12/31/88 15.19 .24 30,306 3.12% 203.06%
12/31/89 16.02 .21 32,379 6.84% 223.79%
12/31/90 12.17 .30 25,212 -22.13% 152.12%
12/31/91 17.02 .09 35,439 40.56% 254.39%
12/31/92 19.41 .00 40,415 14.04% 304.15%
</TABLE>
5
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<TABLE>
<S> <C> <C> <C> <C> <C>
12/31/93 22.43 .00 46,704 15.56% 367.04%
12/31/94 24.06 .00 50,098 7.27% 400.98%
12/31/95 27.02 3.76 64,085 27.92% 540.85%
12/31/96 25.45 3.14 70,183 9.52% 601.83%
12/31/97 27.68 2.81 80,901 15.27% 709.01%
</TABLE>
(a) Per share data has been restated to reflect a three-for-one share split
on February 15, 1990 and a four-for-one share split on November 30,
1986.
(b) Value at end of calendar year of $10,000 investment made on September 2,
1981.
(c) Not annualized and from the date of the initial offering of shares
(September 2, 1981).
The Fund's advertised rates of total return for specified periods and
the value of a $10,000 investment at the end of a specified period are based on
historical performance and are not intended to indicate future performance. The
rates of total return are calculated as indicated above for "total return" and
represent the cumulative total return for the specified period. For example, for
the one and two year periods, and for the period since inception, the cumulative
total returns through December 31, 1997 were, respectively: 15.27%, 26.24% and
709.01%. The dividends and distributions and the principal value of an
investment in The Fund will fluctuate so that a shareholder's shares, when
redeemed, may be worth more or less than the shareholder's original investment.
The Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Money, Investor's
Business Daily, Barron's, Fortune or Business Week). Performance information may
be quoted numerically or may be presented in a table, graph or other
illustration. In addition, Fund performance may be compared to well-known
indices of market performance including the Standard & Poor's (S&P) 500 Index or
the Dow Jones Industrial Average.
PORTFOLIO
The Fund's portfolio of investments as of December 31, 1997 is set forth below:
Investments in Securities
Common Stocks (Shares) Value
-----
Airline
6
<PAGE> 10
20,000 Japan Airlines Co. Ltd. (a) $105,000
Automobile Parts
175,000 TBC Corporation (a) 1,673,437
Banking
25,000 North Fork Bancorporation, Inc. 839,063
75,000 UST Corporation 2,081,250
---------
2,920,313
Business Services
130,000 Butler International, Inc. (a) 2,275,000
Chemicals
6,000 Pioneer Companies Inc. Class A Stock (a) 78,750
Computer Software and Peripheral Equipment
50,000 Software Spectrum (a) 593,750
15,000 ACT Manufacturing, Inc. (a) 211,875
85,000 Madge N.V. (a) 329,375
---------
1,135,000
Employment Agency
130,000 Employee Solutions, Inc. (a) 560,625
Engineering
20,000 Fluor Corporation 747,500
Home Health Care
250,000 Staff Builders, Inc. New Class A (a) 523,438
7
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Hospital and Medical Service Plans
55,000 Maxicare Healthcare Plans, Inc. (a) 598,125
15,000 Medpartners, Inc. (a) 335,625
---------
933,750
Household Products
15,000 Fortune Brands, Inc. 555,937
Mortgage Banker/Broker
85,000 Southern Pacific Funding Corporation (a) 1,115,625
Multiline Insurance
50,000 USF&G Company 1,103,125
Nonferrous Metals
15,000 Cominco, Ltd. 231,563
Office Supplies
60,000 BT Office Products International, Inc. (a) 465,000
Oil and Gas Exploration
100,000 Oryx Energy Company (a) 2,550,000
Paper Products
80,000 Corporate Express, Inc. (a) 1,030,000
Personal Services
70,000 Regis Corporation 1,758,750
Pharmaceuticals
31,000 Novartis AG ADR 2,522,625
Retail
105,000 Spiegel, Inc., Class A (a) 518,437
40,000 Heilig-Meyers Company 480,000
45,000 Garden Ridge Corporation (a) 641,250
---------
1,639,687
8
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Savings Institutions
50,000 CFX Corporation 1,525,000
70,000 Dime Financial Corporation 2,135,000
55,000 Mechanics Savings Bank (a) 1,433,437
---------
5,093,437
Shoes
25,000 Timberland Company (a) 1,451,563
Telephone Communications
70,000 Empresas Telex-Chile SA ADR 275,625
Total Common Stocks (Cost $25,709,932) 30,745,750
Bank Repurchase Agreement
With Star Bank NA of Cincinnati, issued 12/31/97
due 1/2/98, fully collateralized by Government
National Mortgage Association, 6.00% due 5/20/22
(Cost $2,504,000) 2,504,000
---------
Total Investments (Cost $28,213,932) 33,249,750
Other Assets Less Liabilities ( 1,394,010)
------------
Net Assets $31,855,740
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(a) Common stocks which did not declare a dividend in 1997.
INVESTMENT OBJECTIVE, STRATEGY AND RISK FACTORS
The investment objective of The Fund is capital appreciation. The
investment objective of The Fund may be changed by the Board of Trustees without
shareholder approval.
The Fund seeks to achieve its objective by investing in equity
securities that its Adviser believes are undervalued and therefore represent
basic investment value. The Adviser believes that this objective may be realized
by using a strategy of investing in carefully selected, reasonably priced
securities rather than in securities whose prices reflect a premium attributable
to their current market popularity. The Fund seeks special opportunities for
capital appreciation in securities that are selling at a discount from
historical prices and/or at below average price-earnings ratios. The investment
strategy of The Fund is based upon the belief that favorable changes in market
prices for specific securities are more likely to begin once securities are out
of favor, price-earnings ratios are relatively low, investment expectations are
limited, and there is little investor interest in the particular security or
industry involved.
The Adviser employs an aggressive trading strategy to achieve The
Fund's objective and will actively engage in trading for short term profits.
This strategy will result in a significantly higher portfolio turnover rate. The
Fund's turnover rate has approximated 250% each of the last several years, and
it is expected to be substantially higher. This higher portfolio turnover will
result in correspondingly greater brokerage commission expenses and may result
in the realization of additional capital gains for tax purposes.
Fund investments primarily will be in equity securities of seasoned,
established companies which appear to have appreciation potential. Emphasis will
be placed on issues listed on national exchanges. As all investments are subject
to inherent market risks and fluctuations in value due to earnings, economic
conditions and other factors, The Fund cannot give assurance that its investment
objective will be achieved. Income will not be a factor in the selection of The
Fund's portfolio. For a more detailed discussion of The Fund's investment
practices, see "Investment Techniques."
HOW TO INVEST IN THE FUND
Shares of The Fund may be purchased directly from The Fund. The minimum
initial investment is $1,000. Investments by related parties may be aggregated
for purposes of meeting minimum investment requirements. Contact The Fund for
additional information. Additional purchases may be made by a shareholder in any
amount. No commission or sales fee is charged in connection with purchases of
The Fund's shares made directly from The Fund.
Investments by Mail. An investor may purchase shares of The Fund by
mailing the attached application, with a check made payable to The Fairmont Fund
in the amount of the purchase price, to the following address:
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The Fairmont Fund Trust
1346 South Third Street
Louisville, KY 40208
Investments in Fund shares will be credited to a shareholder's account at the
net asset value next determined after receipt by The Fund of the shareholder's
check (in U.S. dollars) and completed application.
Investments by Wire. An investor may purchase shares of The Fund by
wiring federal funds directly to The Fund's custodian. Prior to an investment by
wire, the investor should telephone The Fund (502-636-5633) to advise it of the
investment and to obtain an account number and instructions. The investor is
required to mail a completed application to The Fund in order to make a wire
purchase. There is presently no fee for receipt of wired funds, but the right to
charge shareholders for this service is reserved by the custodian and The Fund.
Other Purchase Information. The Fund's shares are offered for sale on a
continuous basis at the net asset value next determined after the receipt of a
shareholder's check (in U.S. dollars) and application in proper form. Purchase
requests not in proper form will be returned to the investor within seven
business days. The Fund will accept requests to purchase its shares on any day
that the New York Stock Exchange is open for trading. The Fund reserves the
right in its sole and absolute discretion to reject any purchase request in
whole or in part. Requests received subsequent to the close of trading on the
New York Stock Exchange on any day will be treated as if received on the next
business day. No request will be binding until accepted. Any request may be
withdrawn by an investor until accepted by The Fund. The Fund does not issue
share certificates unless requested, but will mail each shareholder a statement
after each transaction and a statement quarterly.
Tax Sheltered Retirement Plans. Since The Fund seeks capital
appreciation, shares of The Fund may be an appropriate investment medium for tax
sheltered retirement plans, including: (a) Keogh (HR-10) Plans (for
self-employed individuals); (b) qualified corporate pension and profit sharing
plans (for employees); (c) individual retirement accounts (IRAs); and (d) tax
deferred investment plans (for employees of public school systems and certain
types of charitable organizations). Consultation with an attorney or tax adviser
regarding these plans is advisable. Contact The Fund for information on the
procedure to open an IRA. Custodial fees for an IRA will be paid by redemption
of sufficient shares of The Fund from the IRA unless the fees are paid directly
to the IRA custodian.
HOW TO WITHDRAW (REDEEM) AN INVESTMENT
The Fund will redeem for cash all full and fractional shares of The
Fund upon receipt of a written request in proper form. Although requests for
redemption usually must be in writing, you may make arrangements for redemption
by telephone under certain circumstances. Contact The Fund for additional
information. The redemption price is the next determined net asset value. The
net asset value received by a shareholder upon the redemption of his shares
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<PAGE> 15
of The Fund may be more or less than the price paid by such shareholder for his
shares depending upon the market value of the securities owned by The Fund at
the time of the redemption.
Shareholders have the right to request a redemption on any day on which
the New York Stock Exchange is open for trading and also on any other day in
which there is significant trading in The Fund's portfolio securities which
might cause a material change in its net asset value. All requests for
redemption must be accompanied by certificates, if issued, for the shares to be
redeemed. A written request must contain the signatures of all persons in whose
names the shares are registered, signed as their names appear on the original
application or on the certificate, as the case may be. In certain instances, The
Fund may require additional documents to insure proper authorization. Contact
The Fund for additional information and additional documents required to redeem
tax sheltered retirement plans.
The Fund will make payment within seven days (normally five business
days) after a request is received in the form described above, except under
unusual circumstances as determined by the Securities and Exchange Commission.
However, redemption proceeds will not be mailed to an investor until the check
used for investment has cleared the investor's bank for payment, which normally
takes place within seven days of the date of purchase.
Because The Fund incurs certain fixed costs in maintaining shareholder
accounts, The Fund reserves the right to acquire any shareholder to redeem all
of his shares after sixty days notice, if redemptions cause the value of his
account to fall below $500 (or such other minimum amount as The Fund may
determine from time to time). A shareholder will be given an opportunity to
increase the value of his shares to the minimum amount within that sixty day
period in order to avoid a mandatory redemption of his shares. Each share of The
Fund is also subject to redemption at any time if the Board of Trustees
determines in its sole discretion that failure to so redeem may have materially
adverse consequences to all or any of the shareholders of The Fund.
OPERATION OF THE TRUST
The Fund is a no-load, diversified series of The Fairmont Fund Trust,
an open-end management investment company established as a business trust under
Kentucky law on December 29, 1980. The Board of Trustees supervises the business
activities of The Trust. The Trust retains The Sachs Company, 1346 South Third
Street, Louisville, Kentucky (the Adviser) to manage The Trust's investments and
its business affairs. The Adviser is an investment manager which has provided
investment advice to individuals, corporations, pension and profit sharing
plans, and trust accounts since 1974. Morton H. Sachs, Trustee, Chairman of the
Board and Chief Executive Officer of The Fund, and President, sole Director and
Shareholder of the Adviser, is responsible for the day-to-day management of The
Fund's portfolio and has been since The Fund's inception. The Trust acts as its
own transfer agent and dividend paying agent.
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<PAGE> 16
For the year ended December 31, 1997, The Fund paid the Adviser a fee
equal to 1.63% of its average daily net assets. All of The Fund's operating
expenses (except brokerage fees and commissions, taxes, interest and
extraordinary expenses) are paid by the Adviser. The Adviser is also a
registered broker-dealer and, in that capacity, receives brokerage commissions
from The Trust.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to its objective of seeking best
qualitative execution of portfolio transactions, the Adviser may give
consideration to sale of shares of The Fund as a factor in the selection of
brokers and dealers to execute portfolio transactions for each series of The
Fund.
Any Trustee may be removed by vote of the shareholders holding not less
than two-thirds of the outstanding shares of The Trust. The Trust does not hold
annual meetings of shareholders. When matters are submitted to shareholders for
a vote, each shareholder is entitled to one vote for each whole share he owns
and fractional votes for fractional shares he owns. All shares have equal voting
rights and liquidation rights.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of The Fund is determined as of 4:00
p.m. Eastern time on each day The Fund is open for business. The Fund is open
for business on any day that the New York Stock Exchange is open for trading.
The net asset value per share is computed by dividing the sum of the value of
the securities held by The Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time, rounded to the nearest cent. The management fee payable to the Adviser is
accrued daily.
Portfolio securities which are traded on stock exchanges or in
over-the-counter markets are valued at the last sale price as of 4:00 p.m.
Eastern time on the day the securities are being valued or, lacking any sales,
at the mean between closing bid and asked prices. Fixed income securities are
valued by using market quotations, or independent pricing services which use
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. It is The Fund's intention to distribute
substantially all of its net investment income, if any, in the form of dividends
to The Fund's shareholders. It is contemplated that net investment income and
net realized long or short term capital gains, if any, reduced by any capital
loss carryovers, will be distributed to The Fund's shareholders
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<PAGE> 17
annually. Such distributions from investment income and capital gains are
automatically reinvested, unless otherwise instructed by the shareholder, in
additional Fund shares at the net asset value next determined after the
distributions are paid. Shareholders may obtain such distributions in cash by
requesting cash distributions on the application accompanying this prospectus or
by sending a written request to The Fund.
Taxes. Dividends paid by The Fund from its ordinary income and
distributions of The Fund's net realized short term capital gains are taxable to
shareholders as ordinary income. However, dividends paid by The Fund may be
eligible in part for the dividends received deduction for corporations. Any
distributions of The Fund's net realized long term capital gains are taxable to
shareholders as long term capital gains regardless of the holding period of such
shareholder.
The Fund will mail to each shareholder a statement setting forth the
federal income tax status of all distributions made during the year.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes and the tax effect of
distributions, exchanges and redemptions from The Fund. The tax consequences
described in this section apply whether distributions are taken in cash or
reinvested in additional shares.
INVESTMENT TECHNIQUES
Subjective judgment will be exercised in selecting securities for
investment, and it is the intention of The Fund's management to use economic
projections, technical analysis and earnings projections for market timing
purposes and for individual stock selection. In seeking The Fund's objective of
capital appreciation, reliance will be placed primarily upon common stocks.
For temporary defensive purposes, or when investment opportunities are
limited, The Fund may at times hold all or a portion of its assets in cash, in
securities of other investment companies or in obligations of the U.S.
Government or its agencies or instrumentalities, and may enter into repurchase
agreements fully collateralized as to principal and interest by such
obligations.
Foreign Securities. The Fund may invest in foreign securities through
the purchase of American Depositary Receipts. American Depositary Receipts are
certificates of ownership issued by a U.S. bank as a convenience to the
investors in lieu of the underlying shares which it holds in custody. The Fund
will not invest in American Depositary Receipts if, immediately after a purchase
and as a result of the purchase, the total value of foreign securities owned by
The Fund would exceed 25% of the value of the total assets of The Fund. To the
extent that The Fund does invest in foreign securities, such investments may be
subject to special risks, such as changes in restrictions on foreign currency
transactions and rates of exchange, and changes in the administrations or
economic and monetary policies of foreign governments.
14
<PAGE> 18
Repurchase Agreements. Repurchase transactions are transactions by
which The Fund purchases a U.S. Government obligation and simultaneously commits
to resell that obligation to the seller at an agreed upon price and date. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or maturity of the purchased
obligation. A repurchase transaction involves the obligation of the seller to
pay the agreed upon price, which obligation is in effect secured by the value of
the underlying U.S. Government obligation. In the event of a bankruptcy or other
default of the seller of a repurchase agreement, The Fund could experience both
delays in liquidating the underlying U.S. Government obligation and losses. To
minimize these possibilities, The Fund intends to enter into repurchase
agreements only with its custodian, banks having assets in excess of $1 billion
and the largest and most creditworthy (as determined by the Board of Trustees
and the Adviser) securities dealers. In addition, the repurchase agreements will
be fully collateralized by the underlying U.S. Government obligations. The Fund
will not engage in a repurchase transaction maturing in more than seven days if
as a result thereof more than 10% of its total assets would be invested in such
transactions and in other illiquid investments.
General. Any investment policy, strategy, technique or practice that is
not labelled fundamental in this Prospectus or the Statement of Additional
Information may be changed by the Board of Trustees without the vote of The
Fund's shareholders. For additional information concerning The Fund's investment
practices, including the risks involved in such practices, see "Investment
Techniques" and "Investment Policies" in the Statement of Additional
Information.
15
<PAGE> 19
THE FAIRMONT FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
This Statement of Additional Information is not a Prospectus. It should
be read in conjunction with the Prospectus of The Fairmont Fund dated May 1,
1998. A copy of the Prospectus can be obtained by writing The Fund at 1346 South
Third Street, Louisville, Kentucky 40208 or by calling The Fund at (502)
636-5633.
<PAGE> 20
TABLE OF CONTENTS
PAGE
----
DESCRIPTION OF THE TRUST.................................... 3
INVESTMENT POLICIES......................................... 3
OTHER RESTRICTIONS.......................................... 5
U.S. GOVERNMENT OBLIGATIONS................................. 6
INVESTMENT ADVISORY AGREEMENT............................... 6
TRUSTEES AND EXECUTIVE OFFICERS............................. 7
PORTFOLIO TRANSACTIONS AND BROKERAGE........................ 9
DETERMINATION OF NET ASSET VALUE............................ 11
TAXES....................................................... 11
CUSTODIAN................................................... 11
TRANSFER AGENT.............................................. 12
AUDITORS.................................................... 12
PERFORMANCE INFORMATION..................................... 12
FINANCIAL STATEMENTS........................................ 13
2
<PAGE> 21
DESCRIPTION OF THE TRUST
The Fairmont Fund Trust (The Trust) is an open-end investment company
established as a business trust under Kentucky law by Declaration of Trust dated
December 29, 1980. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of separate series. This
Statement of Additional Information provides information relating to The
Fairmont Fund series (The Fund).
Each share of a series represents an equal proportional interest in the
assets and liabilities belonging to the series. Upon liquidation of a series,
shareholders are entitled to share pro rata in the net assets of the series
available for distribution to shareholders. Shares of each series are fully paid
and have no preemptive or conversion rights. Kentucky law provides that no
assessment shall be made against the interest of any shareholder and no
shareholder shall be personally liable for any debts or liabilities incurred by
the Trustees or by The Trust.
Shareholders are entitled to one (1) vote for each full share held and
fractional votes for fractional shares held and may vote in the election of
Trustees and on other matters submitted to the vote of shareholders. Voting
rights are cumulative, which means that each shareholder has the right to
cumulate the voting power he possesses and to give one (1) nominee for Trustee
as many votes as the number of Trustees to be elected multiplied by the number
of his shares, or to distribute his votes on the same principle among two or
more candidates, as the shareholder desires. Shares are voted in the aggregate
and not by series, except when the matter to be voted upon affects only the
interest of a particular series. For information concerning the purchase and
redemption of shares of The Fund, see "How to Invest in The Fund" and "How to
Withdraw (Redeem) An Investment" in the Prospectus.
As of April 8, 1998, the Trustees and Officers of The Trust as a group
owned of record and beneficially 56,822 shares of The Fund, or 5.62% of the
outstanding shares of The Fund.
INVESTMENT POLICIES
The Fund has adopted the following investment policies, which may be
changed only with approval of a majority of the outstanding shares of The Fund.
As used in this Statement of Additional Information, the term "majority" of the
outstanding shares of The Fund means the lesser of (1) 67% or more of the
outstanding shares of The Fund present at a meeting, if the holders of more than
50% of the outstanding shares of The Fund are present or represented at such
meeting; or (2) more than 50% of the outstanding shares of The Fund.
1. Borrowing Money. The Fund may borrow money, if it borrows money (a)
from a bank, provided that immediately after such borrowing there is an asset
coverage of 300% for all borrowings of The Fund; or (b) from a bank or other
persons for temporary purposes only, provided that such temporary borrowings are
in an amount not exceeding 5% of The Fund's total assets at the time when the
borrowing is made. The Fund may enter into reverse repurchase transactions and
any other transactions which may be deemed to be borrowings, provided that The
Fund has an asset coverage of
3
<PAGE> 22
300% for all borrowings and commitments of The Fund pursuant to reverse
repurchase and other such transactions.
2. Pledging. The Fund may mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of The Fund if it is
necessary in connection with borrowings described in policy (1) above. For
purposes of the Statement of Intention below, margin deposits, security
interests, liens and collateral arrangements with respect to permitted
investments and techniques are not deemed to be a mortgage, pledge or
hypothecation of assets.
3. Underwriting. The Fund may act as underwriter of securities issued
by other persons if immediately thereafter the amount of its outstanding
underwriting commitments, plus the value of its investments in securities of
issuers (other than investment companies) of which it owns more than 10% of the
outstanding voting securities, does not exceed 25% of its total assets. This
limitation and the Statement of Intention are not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), The Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Fund may purchase, hold or deal in real estate, and
may invest in securities which are secured by or represent interests in real
estate, mortgage-related securities or directly in mortgages.
5. Loans. The Fund may make loans to other persons, including (a)
loaning portfolio securities, (b) engaging in repurchase agreements, (c)
purchasing debt securities, and (d) making direct investments in mortgages. For
purposes of the Statement of Intention below, the term "loans" shall not include
the purchase of a portion of an issue of publicly distributed bonds, debentures
or other securities.
6. Margin Purchases. The Fund may not purchase securities or evidences
of interest thereon on "margin." For purposes of this limitation and the
Statement of Intention below, (a) short term credit obtained by The Fund for the
clearance of purchases and sales or redemption of securities and (b) margin
deposits and collateral arrangements with respect to permitted investments and
techniques are not considered to be purchases on "margin." This limitation is
not applicable to activities that may be deemed to involve purchases on "margin"
by The Fund, provided that The Fund's engagement in such activities is
consistent with or permitted by the Investment Company Act of 1940, the rules
and regulations promulgated thereunder or interpretations of the Securities and
Exchange Commission, its staff or other legal authority.
7. Senior Securities. The Fund may not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by The Fund, provided that The Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, the rules and regulations promulgated thereunder or
interpretations of the Securities and Exchange Commission, its staff or other
legal authority.
8. Short Sales. The Fund may not effect short sales of securities.
9. Options. The Fund may not purchase or sell put or call options.
4
<PAGE> 23
10. Commodities. The Fund may not purchase, hold or deal in
commodities or commodities futures contracts.
11. Concentration. The Fund will not invest 25% or more of its total
assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. Government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
12. Diversification. As a diversified series of The Trust, The Fund
will not purchase the securities of any issuer if such purchase at the time
thereof would cause less than 75% of the value of the total assets of The Fund
to be invested in cash and cash items (including receivables), securities issued
by the U.S. Government, its agencies or instrumentalities and repurchase
agreements with respect thereto, securities of other investment companies, and
other securities for the purposes of this calculation limited in respect of any
one issuer to an amount not greater in value than 5% of the value of the total
assets of The Fund and to not more than 10% of the outstanding voting securities
of such issuer.
Statement of Intention. It is The Fund's intention (which may be
changed by the Board of Trustees without shareholder approval) that it will not
engage in any of the investment practices permitted by (1)-(7) above in the
coming year, except borrowing for temporary purposes and repurchase
transactions. If the Board of Trustees determines that it would be appropriate
for The Fund to employ any of the other investment practices permitted by
(1)-(7) above, The Fund's Prospectus or Statement of Additional Information will
be amended with appropriate disclosure prior to The Fund engaging in the
practice.
With respect to the percentages adopted by The Fund as maximum
limitations in its investment policies, an excess above the fixed percentage
(except for the percentage limitation relative to the borrowing of money) shall
not be a violation of the policy or limitation unless the excess results
immediately and directly from the acquisition of any security or the action
taken.
Notwithstanding any of the foregoing policies or limitations, any
investment company, whether organized as a trust, association or corporation, or
a personal holding company, may be merged or consolidated with or acquired by
The Fund, provided that if such merger, consolidation or acquisition results in
an investment in the securities of any issuer prohibited by said paragraphs, The
Fund shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
OTHER RESTRICTIONS
Restrictions Due to Regulatory Positions. It is the current position of
the staff of the Securities and Exchange Commission that The Trust may not
invest more than 25% of its total assets in securities as to which The Trust
owns more than 10% of the outstanding voting securities of the issuer. The Trust
has made a commitment, which may be changed by the Board of Trustees without
shareholder approval, to comply with the above restriction.
5
<PAGE> 24
It is the current position of the staff of the Securities and Exchange
Commission that The Fund may not invest more than 15% of its net assets in
illiquid securities, including restricted securities, real estate, mortgages and
nonpublicly offered debt securities.
U.S. GOVERNMENT OBLIGATIONS
The Fund may invest in "U.S. Government obligations," which term refers
to a variety of securities which are issued or guaranteed by the United States
Treasury, by various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. The term is also deemed by The Fund to include participation
interests in U.S. Government obligations. Participation interests are pro-rata
interests in U.S. Government obligations held by others. Certificates of deposit
or safekeeping are documentary receipts for U.S. Government obligations held in
custody by others.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Other U.S. Government obligations may or may not
be backed by the "full faith and credit" of the United States. In the case of
securities not backed by the "full faith and credit" of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitments. Furthermore, there can be no assurance that the United
States Government will provide financial support if not obligated to do so by
law.
Treasury securities include Treasury bills, Treasury notes, and
Treasury bonds. Government agencies which issue or guarantee securities backed
by the "full faith and credit" of the United States include the Government
National Mortgage Association and the Small Business Administration. Government
agencies and instrumentalities which issue or guarantee securities not backed by
the "full faith and credit" of the United States include the Farm Credit System,
the Federal Home Loan Banks, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation. The Fund may invest in securities issued
or guaranteed by any of the entities listed above or by any other agency or
instrumentality established or sponsored by the United States Government.
INVESTMENT ADVISORY AGREEMENT
The Trust has entered into a Management Agreement (the Agreement) with
The Sachs Company, 1346 South Third Street, Louisville, Kentucky (the Adviser),
under which the Adviser manages The Trust's portfolios of investments subject to
the approval of the Board of Trustees.
The Adviser is an investment manager which has provided investment
advice to individuals, corporations, pension and profit sharing plans and trust
accounts since 1974, when it was formed as a Kentucky proprietorship. The
Adviser was incorporated in Kentucky in 1975, and its principal place of
business is in Louisville, Kentucky. The Adviser is a broker-dealer registered
under the Securities Exchange Act of 1934, and as a broker operates on a
fully-disclosed basis through Legg Mason Wood Walker, Inc., Conners & Co., Inc.,
or Maxus Securities Corporation.
6
<PAGE> 25
Under the terms of the Agreement, The Fund pays the Adviser a fee
computed and accrued daily and paid monthly at an annual rate of 2% of the
average value of the daily net assets of The Fund up to and including
$10,000,000, 1-1/2% of such assets of The Fund from $10,000,000 to and including
$30,000,000 and 1% of such assets of The Fund in excess of $30,000,000;
provided, however, that the total fees paid during the first and second halves
of each fiscal year of The Trust shall not exceed the semiannual total of the
daily fee accruals requested by the Adviser during the applicable six month
period. Pursuant to the Agreement, the Adviser pays all operating expenses of
The Trust except brokerage fees and commissions, taxes, interest, expenses
incurred by The Trust in connection with the organization and registration of
shares of any series of The Trust established after May 7, 1987, and such
extraordinary or nonrecurring expenses as may arise, including litigation to
which The Trust may be a party and indemnification of The Trust's Trustees and
Officers with respect to the litigation.
For the fiscal years ended December 31, 1997, 1996 and 1995, the
Adviser received advisory fees of $515,556, $503,732 and $421,935, respectively.
The Trust pays no direct remuneration to any Officer of The Trust,
although Morton H. Sachs, by reason of his affiliation with the Adviser, will
receive benefits from the advisory fees and brokerage commissions paid to The
Trust's Adviser, The Sachs Company.
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees and Executive Officers of The Trust and their principal
occupations during the last five years are set forth below. Each Trustee who is
an "interested person" of the Trust, as defined in the Investment Company Act of
1040, is indicated by an asterisk.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With Trust During Past Five Years
- --------------------- ---------- ----------------------
<S> <C> <C>
*Morton H. Sachs Trustee He is the President and sole
1346 South Third St. Chairman of the Board Director and shareholder of
Louisville, KY 40208 Chief Executive Officer The Sachs Company, The
Age: 64 Trust's Adviser.
*Jennifer S. Dobbins Vice President She is a Vice President and a
1346 South Third St. Assistant Secretary Registered Principal of The
Louisville, KY 40208 Trust's Adviser.
Age:38
*Inda M. Wangerin Secretary She is a Vice President and
1346 South Third St. Accountant of The Trust's
Louisville, KY 40208 Adviser.
Age: 76
*Louis T. Young Treasurer He is an employee of The Trust's Adviser.
1346 South Third St.
Louisville, KY 40208
Age: 49
</TABLE>
7
<PAGE> 26
<TABLE>
<S> <C> <C>
Raphael O. Nystrand Trustee Since 1978, he has been a
3015 Springcrest Drive Professor and Dean of the
Louisville, KY 40241 School of Education, University
Age: 60 of Louisville. He was on leave
from this position to serve as
Secretary of Education and Humanities
for the Commonwealth of Kentucky during
calendar year 1984.
William M. Schreiber Trustee He is a physician in private
4003 Kresge Way practice and co-medical
Louisville, KY 40207 director of the Chemical
Age: 62 Dependency Unit of Baptist
Hospital East in Louisville,
Kentucky. He also serves
a director of The Physicians,
Inc, an independent physicians association,
and Chairman of Preferred Health
Plan, a preferred provider association.
</TABLE>
The compensation paid to the Trustees of The Trust for the year ended
December 31, 1997 is set forth in the following table:
Total Compensation from Trust
(The Trust is not in a fund complex)**
Name
Oscar S. Bryant, Jr. 0
Elizabeth H. Moore 4,000
Raphael O. Nystrand 4,000
Morton H. Sachs 0
William M. Schreiber 4,000
8
<PAGE> 27
** Trustee fees are Trust expenses. However, the Adviser makes the
actual payment because the management agreement obligates the Adviser to pay
(with limited exceptions) all of the operating expenses of the Trust.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of The Trust,
the Adviser is responsible for The Fund's portfolio decisions and the placing of
The Fund's portfolio's transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for The Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to The Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to The Fund and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analysis, and statistical services and information with respect to the
availability of securities or purchasers or sellers of securities. Although this
information is useful to The Fund and the Adviser, it is not possible to place a
dollar value on it. It is the opinion of the Board of Trustees and the Adviser
that the review and study of this information will not reduce the overall cost
to the Adviser of performing its duties to The Fund under the Agreement.
Research services furnished by brokers or dealers through whom The Fund effects
securities transactions may be used by the Adviser in servicing all of its
accounts and not all such services may be used by the Adviser in connection with
The Fund. Due to research services provided by brokers, the Fund directed to
brokers $1,550,169 of brokerage transactions (on which commissions were $10,400)
during the fiscal year ended December 31, 1997.
While The Fund does not deem it practicable and in its best interests
to solicit competitive bids for commission rates on each transaction,
consideration is regularly given to posted commission rates as well as other
information concerning the level of commissions charged on comparable
transactions by qualified brokers.
The Fund has no obligation to deal with any broker or dealer in the
execution of its transactions. However, it is contemplated that the Adviser, in
its capacity as a registered broker-dealer, will effect substantially all
securities transactions which are executed on a national securities exchange and
over-the-counter transactions conducted on an agency basis. Such transactions
will be executed at competitive commission rates through Legg Mason Wood Walker,
Inc., Conners & Co., Inc., or Maxus Securities Corporation.
Transactions in the over-the-counter market can be placed directly with
market makers who act as principals for their own account and include mark-ups
in the prices charged for over-the-counter securities. Transactions in the
over-the-counter market can also be placed with broker-dealers who act
9
<PAGE> 28
as agents and charge brokerage commissions for effecting over- the-counter
transactions. The Fund may place its over-the-counter transactions either
directly with principal market makers, or with broker-dealers if that is
consistent with the Adviser's obligation to obtain best qualitative execution.
Under the Investment Company Act of 1940, persons affiliated with The Fund such
as the Adviser are prohibited from dealing with The Fund as a principal in the
purchase and sale of securities. Therefore, The Sachs Company will not serve as
The Fund's dealer in connection with over-the-counter transactions. However, The
Sachs Company may serve as The Fund's broker in over-the-counter transactions
conducted on an agency basis and will receive brokerage commissions in
connection with such transactions. Such agency transactions will be executed
through Legg Mason Wood Walker, Inc., Conners & Co., Inc., or Maxus Securities
Corporation.
The Fund will not effect any brokerage transactions in its portfolio
securities with the Adviser if such transactions would be unfair or unreasonable
to Fund shareholders, and the commissions will be paid solely for the execution
of trades and not for any other services. The Agreement provides that the
Adviser may receive brokerage commissions in connection with effecting such
transactions for The Fund. In determining the commissions to be paid to The
Sachs Company, it is the policy of The Fund that such commissions will, in the
judgment of The Trust's Board of Trustees, be (a) at least as favorable to The
Fund as those which would be charged by other qualified brokers having
comparable execution capability and (b) at least as favorable to The Fund as
commissions contemporaneously charged by The Sachs Company on comparable
transactions for its most favored unaffiliated customers, except for customers
of The Sachs Company considered by a majority of The Trust's disinterested
Trustees not to be comparable to The Fund. The disinterested Trustees from time
to time review, among other things, information relating to the commissions
charged by The Sachs Company to The Fund and its other customers, and
information concerning the commissions charged by other qualified brokers.
Any profits from brokerage commissions earned by The Sachs Company as a
result of portfolio transactions for The Fund will accrue to Morton H. Sachs who
is the sole shareholder of The Sachs Company. The Agreement does not provide for
a reduction of the Adviser's fee by the amount of any profits earned by The
Sachs Company from brokerage commissions generated from portfolio transactions
of The Fund. For the fiscal years ended December 31, 1997, 1996 and 1995, the
Fund's portfolio transactions generated total brokerage commissions of $435,650,
$548,598 and $528,313, respectively. For the fiscal year ended December 31,
1997, The Sachs Company was paid $372,542 or 86% of the total brokerage
commissions for effecting (through Legg Mason, Conners & Co. or Maxus
Securities) 98% of The Fund's commission transactions. For the fiscal year ended
December 31, 1996, The Sachs Company was paid $487,272 or 89% of the total
brokerage commissions for effecting (through Legg Mason or Conners & Co.)
98% of The Fund's commission transactions. For the fiscal year ended
December 31, 1995, The Sachs Company was paid $393,234 or 74% of the total
brokerage commissions for effecting (through Legg Mason or Conners & Co.)
93% of The Fund's commission transactions.
While The Fund contemplates no ongoing arrangements with any other
brokerage firms, brokerage business may be given from time to time to other
firms. The Sachs Company will not receive reciprocal brokerage business as a
result of the brokerage business placed by The Fund with others.
10
<PAGE> 29
When The Fund and another of the Adviser's clients seek to purchase or
sell the same security at or about the same time, the Adviser may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for The Fund because of the increased volume of the
transaction. If the entire order is not filled, The Fund may not be able to
acquire as large a position in such security as it desires or it may have to pay
a higher price for the security. Similarly, The Fund may not be able to obtain
as large an execution of an order to sell or as high a price for any particular
portfolio security if the other client desires to sell the same portfolio
security at the same time. In the event that the entire blocked order is not
filled, the purchase or sale will normally be allocated [on a pro rata basis].
Transactions of advisory clients (including The Fund) may also be blocked with
those of the Adviser or any of its affiliates. The Adviser and its affiliates
will be permitted to participate in a blocked transaction only after all orders
of advisory clients (including The Fund) are filled.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of The Fund is determined as of 4:00
p.m. Eastern time on each day The Fund is open for business. The Fund is open
for business on every day except Saturdays, Sundays and the following holidays:
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. For a
description of the methods used to determine the net asset value, see
"Determination of Net Asset Value" in the Prospectus.
TAXES
The Fund has qualified, and intends to continue to qualify, under
Subchapter M of the Internal Revenue Code. By so qualifying, The Fund will not
be liable for federal income taxes to the extent its taxable net investment
income and net realized capital gains are distributed to shareholders. The Fund
is required by federal law to withhold and remit to the U.S. Treasury a portion
(31%) of the dividend income and capital gains distributions of any account
unless the shareholder provides a taxpayer identification number and certifies
that the taxpayer identification number is correct and that the shareholder is
not subject to backup withholding.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202 has been
retained to act as Custodian of The Trust's investments. The Custodian acts as
The Trust's depository, safekeeps its portfolio securities and investments,
collects all income and other payments with respect thereto, disburses funds at
The Fund's request and maintains records in connection with its duties. Certain
investments may be held by a depository in the United States.
TRANSFER AGENT
The Trust acts as its own transfer agent and dividend paying agent. To
enable The Trust to perform these functions, the Adviser provides computer
services and personnel to The Trust.
11
<PAGE> 30
AUDITORS
The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road,
Westlake, Ohio 44145 has been selected as independent auditors for The Trust for
the year ending December 31, 1998. McCurdy & Associates CPA's, Inc. performs an
annual audit of The Trust's financial statements and provides financial, tax and
accounting consulting services as requested.
PERFORMANCE INFORMATION
Average annual total return is computed by finding the average annual
compounded rates of return (over one, five and ten year periods, and since
inception) 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 $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the applicable
period
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of The Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of The Fund or
considered to be representative of the stock market in general. For example, The
Fund's performance may be compared to that of the Standard & Poor's 500 Stock
Index and the Dow Jones Industrial Average. The investment performance figures
for The Fund and the indices will include reinvestment of dividends and capital
gains distributions.
In addition, the performance of The Fund may be compared to other
groups of mutual funds tracked by Lipper Analytical Services, Inc. or
Morningstar, Inc., two widely used independent research firms which rank mutual
funds by overall performance, investment objectives and assets. Performance
rankings and ratings reported periodically in national financial publications
such as Barron's, Money, Investor's Business Daily, Fortune or Business Week may
also be used.
FINANCIAL STATEMENTS
The financial statements and independent auditor's report required to
be included in the Statement of Additional Information are incorporated herein
by reference to the Trust's Annual Report to Shareholders for the fiscal year
ended December 31, 1997. The Trust will provide the Annual Report without charge
at written or telephone request.
12
<PAGE> 31
THE FAIRMONT FUND TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Included in Part A for The Fairmont Fund series:
Financial Highlights
Included in Part B for The Fairmont Fund series:
Independent Auditor's Report
Statement of Assets and Liabilities December 31, 1997
Statement of Operations Year Ended December 31, 1997
Statement of Changes in Net Assets Years Ended
December 31, 1997 and 1996
Schedule of Investments December 31, 1997
Financial Highlights for the Years Ended December
31, 1997, 1996 1995, 1994 and 1993
Notes to Financial Statements December 31, 1997
(b) Exhibits:
(1) (i) Registrant's Declaration of Trust is filed
herewith.
(ii) Copy of Amendent No. 1 to Registrant's
Declaration of Trust dated June 1, 1981, is
filed herewith.
(iii) Copy of Amendment No. 2 to
Registrant's Declaration of Trust
dated May 15, 1984, is filed
herewith.
4
<PAGE> 32
(iv) Copy of Amendment No. 3 to
Registrant's Declaration of Trust
dated October 28, 1986, is filed
herewith.
(v) Copy of Amendment No. 4 to
Registrant's Declaration of Trust
dated April 28, 1988, is filed
herewith.
(vi) Copy of Amendment No. 5 to
Registrant's Declaration of Trust
dated September 11, 1990, is filed
herewith.
(2) Copy of Registrant's Amended and Restated
By-Laws adopted September 17, 1996, which
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 23, is hereby
incorporated by reference.
(3) Voting Trust Agreements - None.
(4) Specimen of Share Certificates - None.
(5) Registrant's Management Agreement for The
Fairmont Fund series with The Sachs Company
(formerly Morton H. Sachs & Co.) is filed
herewith.
(6) Underwriting Agreements - None
(7) Bonus, Profit Sharing, Pension or Similar
Contracts for the benefit of directors or
officers - None.
(8) Registrant's agreement with the Custodian,
Star Bank, N.A., Cincinnati, Ohio which was
filed as an Exhibit to Registrant's
Post-Effective Amendment No. 22, is hereby
incorporated by reference.
(9) Other Material Contracts - None.
5
<PAGE> 33
(10) (i) Opinion and Consent of Brown,
Cummins & Brown, which was filed
with Registrant's Form 24F-2 for the
fiscal year ended December 31, 1996,
is hereby incorporated by reference.
(ii) Opinion and Consent of John S.
Greenebaum, which was filed with
Registrant's Form 24F-2 for the
fiscal year ended December 31, 1996,
is hereby incorporated by reference.
(11) Consent of McCurdy & Associates CPA's, Inc.
is filed herewith.
(12) Financial Statements Omitted from Item 23,
Part B - None.
(13) Copy of Letters of Initial Stockholders of
The Fairmont Fund series is filed herewith.
(14) Model Plan Used in Establishment of any
Retirement Plan - The
Liberty-Fairmont IRA Master Plan,
Liberty-Fairmont IRA Adoption Agreement and
Liberty-Fairmont IRA Fact Book and
Disclosure are filed herewith.
(15) Rule 12b-1 Plan and Implementation
Agreements- None.
(16) Schedule for Computation of Each Performance
Quotation is filed herewith.
(17) Financial Data Schedule - None.
(18) Rule 18f-3 Plan - None.
(19) Powers of Attorney for the Registrant and
its Trustees and Officers, which were filed
as an Exhibit to Registrant's Post-
Effective Amendment No. 23, are hereby
incorporated by
reference.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities (as of March 31, 1998)
Title of Class Number of Record Holders
-------------- ------------------------
The Fairmont Fund 973
6
<PAGE> 34
Item 27. Indemnification
Article VI of the Registrant's Declaration of Trust provides
for indemnification of officers and trustees to the extent
permitted by applicable law. The indemnification provisions
are in accordance with Investment Company Act Release No.
11330 (September 2, 1980).
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
provisions of Kentucky law and the Registrant's Declaration of
Trust and By Laws, 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 question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) The Sachs Company (the "Adviser") is a registered
investment adviser and a registered broker-dealer. It has
engaged in no other business during the past two fiscal years.
(b) Morton H. Sachs is the President and sole director of the
Adviser. The following list sets forth the business and other
connections of Mr. Sachs:
(1) Partner, Windhurst Farm, 1346 South Third Street,
Louisville, Kentucky 40208.
(2) Shareholder and officer of Premier Care,
Inc., 1346 South Third Street, Louisville,
Kentucky 40208.
Item 29. Principal Underwriters
None.
Item 30. Location of Accounts and Records
7
<PAGE> 35
The Registrant will maintain physical possession of the Declaration of
Trust, ByLaws and minute books. All other accounts, books and other
documents required to be maintained by section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder will be
maintained by the Registrant or Star Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45202 as Custodian for the Registrant.
Item 31. Management Services Not Discussed in Parts A or B
None.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
8
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment to
its Registration Statement pursuant to Rule 485(b) under the Securities act of
1933 and has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Cincinnati, State
of Ohio on the 1st day of May, 1998.
THE FAIRMONT FUND TRUST
By: /s/
----------------------------
DONALD S. MENDELSOHN
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
MORTON H. SACHS* Chairman of the
Board & Trustee
*By: /s/
LOUIS YOUNG* Treasurer -----------------------
DONALD S. MENDELSOHN
Attorney-in-Fact
RAPHAEL O. NYSTRAND* Trustee
May 1, 1998
WILLIAM M. SCHREIBER* Trustee
9
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Declaration of Trust.............................................EX-99.B1.1
2. Amendment No. 1 to Declaration of Trust..........................EX-99.B1.2
3. Amendment No. 2 to Declaration of Trust..........................EX-99.B1.3
4. Amendment No. 3 to Declaration of Trust..........................EX-99.B1.4
5. Amendment No. 4 to Declaration of Trust..........................EX-99.B1.5
6. Amendment No. 5 to Declaration of Trust..........................EX-99.B1.6
7. Management Agreement...............................................EX-99.B5
8. Consent of McCurdy & Associates CPA's, Inc........................EX-99.B11
9. Initial Stockholder Letters.......................................EX-99.B13
10. Model Retirement Plan.............................................EX-99.B14
11. Schedule for Computation of Each Performance Quotation............EX-99.B16
</TABLE>
9
<PAGE> 1
Exhibit 99.B1.1
THE FAIRMONT FUND
AGREEMENT AND DECLARATION OF TRUST
DECEMBER 29, 1980
<PAGE> 2
THE FAIRMONT FUND
AGREEMENT AND DECLARATION OF TRUST
<TABLE>
<CAPTION>
AGE
---
<S> <C> <C>
ARTICLE I. NAME AND DEFINITIONS.................................1-2
- ---------- --------------------
Section 1.1 Name and Principal Office..............................1
Section 1.2 Definitions..........................................1-2
(a) "Trust".........................................1
(b) "Trustees"......................................1
(c) "Shares"........................................1
(d) "Series"........................................1
(e) "Shareholder"...................................1
(f) "1940 Act"......................................2
(g) "Commission"....................................2
(h) "Declaration of Trust"..........................2
(i) "By-Laws".......................................2
ARTICLE II. PURPOSE OF TRUST.......................................2
ARTICLE III. THE TRUSTEES.........................................2-7
Section 3.1 Number, Designation, Election, Term, etc...............2
(a) Initial Trustees................................2
(b) Number..........................................2
(c) Term............................................2
(d) Resignation and Retirement......................2
(e) Removal.......................................2-3
(f) Vacancies.......................................3
(g) Effect of Death, Resignation, etc...............3
(h) No Accounting...................................3
Section 3.2 Powers of Trustees...................................3-5
(a) Investments.....................................4
(b) Disposition of Assets.......................... 4
(c) Ownership Powers................................4
(d) Subscription....................................4
(e) Form of Holding.................................4
(f) Reorganization, etc.............................4
(g) Voting Trusts, etc............................4-5
(h) Compromise......................................5
(i) Partnerships, etc...............................5
(j) Borrowing and Security..........................5
(k) Guarantees, etc.................................5
(l) Insurance.......................................5
(m) Pensions, etc...................................5
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.3 Certain Contracts.............................................6-7
(a) Advisory.................................................6
(b) Administration...........................................6
(c) Distribution.............................................6
(d) Custodian and Depository.................................6
(e) Transfer and Dividend Disbursing Agency..................6
(f) Shareholder Servicing....................................6
(g) Accounting...............................................6
Section 3.4 Payment of Trust Expenses and Compensation of Trustees..........7
Section 3.5 Ownership of Assets of the Trust................................7
ARTICLE IV. SHARES.......................................................8-13
Section 4.1 Description of Shares.........................................8-9
Section 4.2 Establishment and Designation of Series.........................9
(a) Assets Belonging to Series............................9-10
(b) Liabilities Belonging to Series.........................10
(c) Dividends............................................10-11
(d) Liquidation.............................................11
(e) Voting..................................................11
(f) Redemption by Shareholder............................11-12
(g) Redemption by Trust.....................................12
(h) Net Asset Value.........................................12
(i) Transfer................................................12
(j) Equality................................................12
(k) Fractions...............................................12
(l) Conversion Rights.......................................13
Section 4.3 Ownership of Shares............................................13
Section 4.4 Investments in the Trust.......................................13
Section 4.5 No Preemptive Rights...........................................13
Section 4.6 Status of Shares and Limitation of Personal Liability..........13
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS....................13-15
Section 5.1 Voting Powers...............................................13-14
Section 5.2 Meetings.......................................................14
Section 5.3 Record Dates................................................14-15
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.4 Quorum and Required Vote.....................................................15
Section 5.5 Action by Unanimous Consent..................................................15
Section 5.6 Inspection of Records........................................................15
Section 5.7 Additional Provisions........................................................15
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION....................................15-17
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice................15-16
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety................16
Section 6.3 Indemnification of Shareholders...........................................16-17
Section 6.4 Indemnification of Trustees, Officers, etc...................................16
Section 6.5 Advances of Expenses.........................................................17
Section 6.6 Indemnification Not Exclusive, etc...........................................17
Section 6.7 Liability of Third Persons Dealing with Trustees.............................17
ARTICLE VII. MISCELLANEOUS...............................................................17-19
Section 7.1 Duration and Termination of Trust.........................................17-18
Section 7.2 Reorganization...............................................................18
Section 7.3 Amendments...................................................................18
Section 7.4 Filing of Copies; References; Headings....................................18-19
Section 7.5 Applicable Law...............................................................19
</TABLE>
(iii)
<PAGE> 5
THE FAIRMONT FUND
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Louisville, Kentucky, this
day of December, 1980, by the Trustees hereunder, and by the holders of Shares
of beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of a Kentucky business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as
"The Fairmont Fund" and the Trustees shall conduct the business of the Trust
under that name or any other name as they may from time to time determine. The
principal office of the Trust shall be located at 2705 Citizens Plaza,
Louisville, Kentucky or such other location as the Trustees may from time to
time determine.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Kentucky business trust established
by this Agreement and Declaration of Trust, as amended from
time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust or any Series of
the Trust (as the context may require) shall be divided from
time to time;
(d) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article IV;
<PAGE> 6
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from
time to time;
(g) "Commission" shall have the meaning given it in the 1940 Act;
(h) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
and
(i) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company, to
offer Shareholders one or more investment programs primarily in securities and
debt instruments and to transact any or all lawful business.
ARTICLE III
THE TRUSTEES
SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEES. Upon his execution of this Declaration of
Trust or a counterpart hereof or some other writing in which
he accepts such Trusteeship and agrees to the provisions
hereof, each of Morton H. Sachs, Raphael O. Nystrand, Carl T.
Fischer, Jr., and O. Grant Bruton shall become a Trustee
hereof.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming a Trustee, may increase or decrease (to not
less than three) the number of Trustees to a number other than
the number theretofore determined. No decrease in the number
of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
(c) TERM. Each Trustee, whether named above or hereafter becoming
a Trustee, shall serve as a Trustee until the next annual
meeting of Shareholders or any special meeting in lieu thereof
and until the election and qualification of his successor, if
any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust
or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees
-2-
<PAGE> 7
or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument.
(e) REMOVAL. Any Trustee may be removed with or without cause at
any time either by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal,
specifying the date upon which such removal shall become
effective, or by the Shareholders at any meeting called for
the purpose.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from
any reason, including without limitation the death,
resignation, retirement, removal or incapacity of any of the
Trustees, or resulting from an increase in the number of
Trustees by the Trustees may (but so long as there are at
least three remaining Trustees, need not unless required by
the 1940 Act) be filled either by a majority of the remaining
Trustees through the appointment in writing of such other
person as such remaining Trustees in their discretion shall
determine (unless a shareholder election is required by the
1940 Act) or by the election by the Shareholders, at a meeting
called for the purpose, of a person to fill such vacancy, and
such appointment or election shall be effective upon the
written acceptance of the person named therein to serve as a
Trustee and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such
appointment or election in anticipation of a vacancy to occur
by reason of retirement, resignation, or increase in number of
Trustees to be effective at a later date shall become
effective only at or after the effective date of said
retirement, resignation, or increase in number of Trustees. As
soon as any Trustee so appointed or elected shall have
accepted such appointment or election and shall have agreed in
writing to be bound by this Declaration of Trust and the
appointment or election is effective, the Trust estate shall
vest in the new Trustee, together with the continuing
Trustees, without any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one
of them, shall not operate to annul or terminate the Trust or
to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Declaration of
Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act
or under circumstances which would justify his removal for
cause, no person ceasing to be a Trustee as a result of his
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
SECTION 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such By-Laws do not reserve that
right to the
-3-
<PAGE> 8
Shareholders; they may as they consider appropriate elect and remove officers
and appoint and terminate agents and consultants and hire and terminate
employees, any one or more of the foregoing of whom may be a Trustee, and may
provide for the compensation of all of the foregoing; they may appoint from
their own number, and terminate, any one or more committees consisting of two or
more Trustees, including without implied limitation an executive committee,
which may, when the Trustees are not in session and subject to the 1940 Act,
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; in accordance with Section 3.3 they may employ one or more
Advisers, Administrators, Depositories and Custodians and may authorize any
Depository or Custodian to employ subcustodians or agents and to deposit all or
any part of such assets in a system or systems for the central handling of
securities and debt instruments, retain transfer, dividend, accounting or
Shareholder servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more distributors, principal
underwriters or otherwise, set record dates or times for the determination of
Shareholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact for
the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority:
(a) INVESTMENTS. To invest and reinvest cash and other property,
and to hold cash or other property uninvested without in any
event being bound or limited by any present or future law or
custom in regard to investments by trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all
of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute and
deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall
deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities or debt instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or
property in a form not indicating any trust, whether in
bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depository or a nominee or nominees or
otherwise;
-4-
<PAGE> 9
(f) REORGANIZATION, ETC. To consent to or participate in any plan
for the reorganization, consolidation or merger of any
corporation or issuer, any security or debt instrument of
which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with
respect to any security or debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any
securities or debt instruments in acting through a committee,
depository, voting trustee or otherwise, and in that
connection to deposit any security or debt instrument with, or
transfer any security or debt instrument to, any such
committee, depository or trustee, and to delegate to them such
power and authority with relation to any security or debt
instrument (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such
committee, depository or trustee as the Trustees shall deem
proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or
limited partnerships and any other combinations or
associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and
pledge the assets of the Trust or any part thereof to secure
obligations arising in connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust property
or any part thereof to secure any of or all such obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets of
the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected
therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding,
being or having held any such office or position, or by reason
of any action alleged to have been taken or omitted by any
such person in any such capacity, including any action taken
or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify
such person against such liability; and
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by
-5-
<PAGE> 10
the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the Trustees
may be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Kentucky, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by written consents of a majority of the Trustees then in office.
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals
("Contracting Party") to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or of the
Trust and/or the Trustees, and to provide for the performance and assumption of
such other services, duties and responsibilities in addition to those set forth
below as the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees
and in conformity with the stated policy of the Trustees with
respect to the investments of the Trust or of the assets
belonging to any Series of Shares of the Trust (as that phrase
is defined in subsection (a) of Section 4.2), to manage such
investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio
transactions relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees
with respect to the operations of the Trust, to supervise all
or any part of the operations of the Trust, and to provide all
or any part of the administrative and clerical personnel,
office space and office equipment and services appropriate for
the efficient administration and operations of the Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust, to be
principal underwriter of such Shares, and/or to act as agent
of the Trust in the sale of Shares and the acceptance or
rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to
maintain custody of the property of the Trust and accounting
records in connection therewith;
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(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records
of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof, and to disburse any
dividends declared by the Trustees and in accordance with the
policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with
respect to Shareholders and their Shares, and similar matters;
and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any Contracting Party,
or of or for any parent or affiliate of any Contracting Party or that the
Contracting Party or any parent or affiliate thereof is a Shareholder or has an
interest in the Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or has
other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or its Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (i) on the part of any Trustee or
officer of the Trust either (1) the material facts as to such relationship or
interest have been disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in good faith by
a majority of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all of
the Trustees), (2) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders entitled
to vote thereon and the contract involved is specifically approved in good faith
by vote of the Shareholders, or (3) the specific contract involved is fair to
the Trust as of the time it is authorized, approved or ratified by the Trustees
or by the Shareholders.
SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES.
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The Trustees are authorized to pay or to cause to be paid out of the principal
or income of the Trust, or partly out of principal and partly out of income, and
to charge or allocate the same to, between or among such one or more of the
Series that may be established and designated pursuant to Article IV, as the
Trustees deem fair, all expenses, fees, charges, taxes and liabilities incurred
or arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
SECTION 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV
SHARES
SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value and of one class, but the
Trustees shall have the authority from time to time to divide the class of
Shares into two or more Series of Shares (including without limitation those
Series specifically established and designated in Section 4.2), as they deem
necessary or desirable, to establish and designate such Series, and to fix and
determine the relative rights and preferences as between the different Series of
Shares as to right of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Series shall have separate voting rights or
no voting rights. Except as aforesaid all Shares of the different Series shall
be identical.
The Shares of each Series may be issued or reissued from time to time
in one or more sub-series ("Sub-Series"), as determined by the Board of Trustees
pursuant to resolution. Each Sub-Series shall be appropriately designated, prior
to the issuance of any shares thereof, by some distinguishing letter, number or
title. All Shares within a Sub-Series shall be alike in every particular. All
Shares of each Series shall be of equal rank and have the same powers,
preferences and rights, and shall be subject to the same qualifications,
limitations and restrictions without distinction between the shares of different
Sub-Series thereof, except with respect to such differences among such
Sub-Series as the Board of Trustees shall from time to time determine to be
necessary to comply with the Investment Company Act of 1940 or other applicable
laws, including differences in the rate or rates of dividends or distributions.
The Board of Trustees may from time to time increase the number of Shares
allocated to any Sub-Series already created by providing that any unissued
Shares of the applicable Series shall constitute part of such Sub-Series, or may
decrease the number of Shares allocated to any Sub- Series already created by
providing that any unissued Shares previously assigned to such Sub- Series shall
no longer constitute part thereof. The Board of Trustees is hereby empowered to
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classify or reclassify from time to time any unissued Shares of each Series by
fixing or altering the terms thereof and by assigning such unissued shares to an
existing or newly created Sub- Series. Notwithstanding anything to the contrary
in this paragraph the Board of Trustees is hereby empowered (i) to redesignate
any issued Shares of any Series by assigning a distinguishing letter, number or
title to such shares and (ii) to reclassify all or any part of the issued Shares
of any Series to make them part of an existing or newly created Sub-Series.
The number of authorized Shares that may be issued is unlimited, and
the Trustees may issue Shares of any Series for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series into one or more Series that may be established and
designated from time to time. The Trustees may hold as treasury Shares (of the
same or some other Series), reissue for such consideration and on such terms as
they may determine, or cancel, at their discretion from time to time, any Shares
of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders of
Shares entitled to be treated as such, to the extent required for the operation
of the Trust.
The establishment and designation of any Series of Shares in addition
to those established and designated in Section 4.2, or of any Sub-Series of
shares, shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Sub- Series, or as otherwise
provided in such instrument. At any time that there are no Shares outstanding of
any particular Series or Sub-Series previously established and designated the
Trustees may by an instrument executed by a majority of their number abolish
that Series or Sub-Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Series of the Trust to the same extent as if such person were not
a Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting
the authority of the Trustees set forth in Section 4.1 to establish and
designate any further Series, the Trustees hereby establish and designate one
Series of Shares: "The Fairmont Fund" Series. Any shares of any Series that may
from time to time be established and designated by the Trustees shall (unless
the Trustees otherwise determine with respect to some further Series or
Sub-Series at the time of establishing and designating the same) have the
following relative rights and preferences:
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(a) ASSETS BELONGING TO SERIES. All consideration received by the
Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to
that Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any
General Items allocated to that Series as provided in the
following sentence, are herein referred to as "assets
belonging to" that Series. In the event that there are any
assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively "General
Items"), the Trustees shall allocate such General Items to and
among any one or more of the Series established and designated
from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for
all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which
items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities of the
Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to
any particular Series shall be allocated and charged by the
Trustees to and among any one or more of the Series
established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses, costs,
charges and reserves allocated and so charged to a Series are
herein referred to as "liabilities belonging to" that Series.
Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon
the holders of all Series for all purposes.
(c) DIVIDENDS. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to
the holders of Shares of that Series, from such of the income
and capital gains, accrued or realized, from the assets
belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Shares of a
particular Series shall be distributed
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pro rata to the holders of that Series in proportion to the
number of Shares of that Series held by such holders at the
date and time of record established for the payment of such
dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times
established by the Trustees under such program or procedure,
and except that if Sub-Series have been established for any
Series, the rate of dividends or distributions may vary among
such Sub-Series pursuant to resolution, which may be a
standing resolution, of the Board of Trustees. Such dividends
and distributions may be made in cash or Shares or a
combination thereof as determined by the Trustees or pursuant
to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance
with subsection (h) of Section 4.2.
The Trust intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1954, as amended,
or any successor or comparable statute thereto, and
regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of
the Trust, the Board of Trustees shall have the power, in its
sole discretion, to distribute in any fiscal year as
dividends, including dividends designated in whole or in part
as capital gains distributions, amounts sufficient, in the
opinion of the Board of Trustees, to enable the Trust to
qualify as a regulated investment company and to avoid
liability of the Trust for federal income tax in respect of
that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions
greater than or less than the amount necessary to qualify as a
regulated investment company and to avoid liability of the
Trust for such tax.
(d) LIQUIDATION. In event of the liquidation or dissolution of the
Trust, the Shareholders of each Series that has been
established and designated shall be entitled to receive, as a
Series, when and as declared by the Trustees, the excess of
the assets belonging to that Series over the liabilities
belonging to that Series. The assets so distributable to the
Shareholders of any particular Series shall be distributed
among such Shareholders in proportion to the number of Shares
of that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be
authorized by vote of a majority of the Trustees then in
office subject to the approval of a majority of the
outstanding voting securities, as defined in the 1940 Act,
(Shares) of that Series.
(e) VOTING. On each matter submitted to a vote of the
Shareholders, each holder of a Share shall be entitled to one
vote for each such Share standing in his name on the books of
the Trust irrespective of the Series thereof and all Shares of
all Series shall vote as a single class ("Single Class
Voting"); provided, however, that (a) as to any matter with
respect to which a separate vote of any Series is required by
the 1940 Act or rules and regulations promulgated thereunder,
or
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would be required under the Kentucky Business Corporation Law
if the Trust were a Kentucky business corporation, such
requirements as to a separate vote by that Series shall apply
in lieu of Single Class Voting as described above; (b) in the
event that the separate vote requirements referred to in (a)
above apply with respect to one or more Series, then, subject
to (c) below, the Shares of all other Series shall vote as a
single class; and (c) as to any matter which does not affect
the interest of a particular Series, only the holders of
Shares of the one or more affected Series shall be entitled to
vote.
Each Shareholder entitled to vote at the election of Trustees
shall have the right to cast, in person or by proxy, as many
votes in the aggregate as he shall have standing in his name
on the books of the Trust as of the record date selected by
the Board of Trustees, multiplied by the number of Trustees to
be elected at such election; and each Shareholder may cast the
whole number of votes for one candidate, or distribute such
votes among two or more candidates.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a
particular Series shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each
week, to require the Trust to redeem all or any part of his
Shares of that Series at a redemption price equal to the net
asset value per Share of that Series next determined in
accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption. Payment of the
redemption price shall be in cash; provided, however, that if
the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in
cash unwise or undesirable, the Trust may make payment wholly
or partly in securities or other assets belonging to the
Series of which the Shares being redeemed are part at the
value of such securities or assets used in such determination
of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem
Shares of that Series during any period or at any time when
and to the extent permissible under the 1940 Act, and such
redemption is conditioned upon the Trust having funds or
property legally available therefor.
(g) REDEMPTION BY TRUST. Each Share of each Series that has been
established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if
such Share was then being redeemed by the Shareholder pursuant
to subsection (f) of this Section 4.2 at any time if the
Trustees determine in their sole discretion that failure to so
redeem may have materially adverse consequences to all or any
of the holders of the Shares, or any Series thereof, of the
Trust, and upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price. In
addition, the Board of Trustees, in its sole discretion, may
require a Shareholder to redeem all of his Shares of any
Series within thirty days after the end of a calendar quarter,
if the value of all of his shares of that Series at the end of
said calendar quarter is less than the minimum
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amount established from time to time by the Board of Trustees.
(h) NET ASSET VALUE. The net asset value per Share of any Series
shall be the quotient obtained by dividing the value of the
net assets of that Series (being the value of the assets
belonging to that Series less the liabilities belonging to
that Series) by the total number of Shares of that Series
outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
(i) TRANSFER. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Series
will be recorded on the Share transfer records of the Trust
applicable to that Series only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of
that Series and at such other times as may be permitted by the
Trustees.
(j) EQUALITY. All Shares of each particular Series shall represent
an equal proportionate interest in the assets belonging to
that Series (subject to the liabilities belonging to that
Series), and each Share of any particular Series shall be
equal to each other Share of that Series; but the provisions
of this sentence shall not restrict any distinctions
permissible under subsection (c) of this Section 4.2 that may
exist with respect to dividends and distributions on Shares of
the same Series. The Trustees may from time to time divide or
combine the Shares of any particular Series into a greater or
lesser number of Shares of that Series without thereby
changing the proportionate beneficial interest in the assets
belonging to that Series or in any way affecting the rights of
Shares of any other Series.
(k) FRACTIONS. Any fractional Share of any Series or Sub-Series,
if any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole
Share of that Series or Sub-Series, including with respect to
voting, receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series shall have the
right to convert said Shares into Shares of one or more other
Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series
that has been established and designated. Certificates certifying the ownership
of Shares shall be issued by the Trustees, which certificates shall be
transferable in the same manner as stock certificates of a corporation. The
Trustees may make such rules as they consider appropriate for the issuance of
Share certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders and as to the number of Shares of each
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Series and Sub-Series held from time to time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. No assessments shall be made against the interest of
any shareholder and no shareholder shall be personally liable for any debts or
liabilities incurred by the Trustees or the Trust. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the Trust nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Series to
the extent and as provided in Sections 7.1 and 7.2, (iv) with respect to any
amendment of this Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of a Kentucky business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivately or as a class action on behalf of
the Trust or the Shareholders, and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this Declaration of
Trust, the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable. There shall be no cumulative voting in the election of any Trustee or
Trustees. Shares may be voted in person or by proxy. A proxy with respect to
Shares held in the name of two or more persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed valid unless
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challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by Shareholders.
SECTION 5.2 MEETINGS. There shall be an annual meeting of Shareholders
at such place within or without the Commonwealth of Kentucky and on such date as
may be designated in the call thereof, which call shall be made by the Trustees.
In the event that such meeting is not held in any year within the time period
fixed in the By-Laws, whether the omission be by oversight or otherwise, a
subsequent special meeting may be called by the Trustees and held in lieu of the
annual meeting with the same effect as though held within such time period.
Special meetings (including meetings involving only the holders of Shares of one
or more but less than all Series) may also be called by the Trustees from time
to time for the purpose of taking action upon any matter requiring the vote or
authority of the Shareholders as herein provided or upon any other matter deemed
by the Trustees to be necessary or desirable. Written notice of any such meeting
shall be given or caused to be given by the Trustees by mailing such notice at
least seven days before such meeting, postage prepaid, stating the time, place
and purpose of the meeting, to each Shareholder entitled to vote at such meeting
at the Shareholder's address as it appears on the records of the Trust. If the
Trustees shall fail to call or give notice of any meeting of Shareholders
(including a meeting involving only the holders of Shares of one or more but
less than all Series) for a period of 30 days after written request by
Shareholders holding at least 25% of the Shares then outstanding of any Series
entitled to vote upon any matter requiring action by the Shareholders as
provided herein that a meeting be called to consider such matter, then
Shareholders holding at least 25% of the Shares then outstanding of such Series
may call and give notice of such meeting, and thereupon the meeting shall be
held in the manner provided for herein in case of call thereof by the Trustees.
SECTION 5.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or (subject to any provisions permissible
under subsection (c) of Section 4.2 with respect to dividends or distributions
on Shares that have not been ordered and/or paid for by the time or times
established by the Trustees under the applicable dividend or distribution
program or procedure then in effect) to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date and time
disposed of his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
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SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present, shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
Notwithstanding any provision of applicable law requiring a greater proportion
than a majority of the votes entitled to be cast in order to take or authorize
any action (unless otherwise provided in this Declaration of Trust or the
ByLaws), any such action may be taken or authorized upon the concurrence of at
least a majority of the aggregate number of votes entitled to be cast thereon.
SECTION 5.5 ACTION BY UNANIMOUS CONSENT. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if all of the Shareholders entitled to vote on the
matter consent to the action in writing and such written consents are filed with
the records of the meetings of Shareholders. Such consent shall be treated for
all purposes as a vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Kentucky business corporation under the Kentucky Business
Corporation Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been executed or
done only by or for the Trust or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the Shareholders to which such Trustee or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of the Commonwealth of
Kentucky and shall recite to the effect that the same was executed or made by or
on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
-16-
<PAGE> 21
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or Shareholders
or Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice;
and (c) in discharging their duties, the Trustees, when acting in good faith,
shall be entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 3.3. The Trustees as such
shall not be required to give any bond or surety or any other security for the
performance of their duties.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Trust estate to be held harmless from and indemnified against
all loss and expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify each of its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise),
(hereinafter referred to as a "Covered Person") against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a Trustee or
officer, director or trustee, and except that no Covered Person shall be
indemnified against any liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of
-17-
<PAGE> 22
the duties involved in the conduct of such Covered Person's office ("disabling
conduct"). Anything herein contained to the contrary notwithstanding, no Covered
Person shall be indemnified for any liability to the Trust or its Shareholders
to which such Covered Person would otherwise be subject unless (1) a final
decision on the merits is made by a court or other body before whom the
proceeding was brought that the Covered Person to be indemnified was not liable
by reason of disabling conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review of the facts, that the
Covered Person was not liable by reason of disabling conduct, by (a) the vote of
a majority of a quorum of Trustees who are neither "interested persons" of the
Company as defined in the Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party Trustees"), or (b) an independent legal
counsel in a written opinion.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a proceeding,
upon the undertaking by or on behalf of the Covered Person to repay the advance
unless it is ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is met: (i) the
Covered Person shall provide security for his undertaking, (ii) the Trust shall
be insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested non-party Trustees of the Trust, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators, an "interested Covered Person" is one against whom the
action, suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such person.
SECTION 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote
-18-
<PAGE> 23
of a majority of the outstanding voting securities, as defined in the 1940 Act,
(Shares) of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey and transfer
the assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting securities, as defined in
the 1940 Act, (Shares) of that Series. Following such transfer, the Trustees
shall distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred, the
Trust shall be terminated.
SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Sub-Series or (b) having the purpose of
changing the name of the Trust or the name of any Shares theretofore established
and designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
-19-
<PAGE> 24
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of State of the Commonwealth of Kentucky and with the Clerk of the
County Court of Jefferson County, Kentucky as well as any other governmental
office where such filing may from time to time be required, but the failure to
make any such filing shall not impair the effectiveness of this instrument or
any such amendment. Anyone dealing with the Trust may rely on a certificate by
an officer of the Trust as to whether or not any such amendments have been made,
as to the identities of the Trustees and officers, and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as a whole
as the same may be amended or affected by any such amendments. The masculine
gender shall include the feminine and neuter genders. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is made in the
Commonwealth of Kentucky, and it is created under and is to be governed by and
construed and administered according to the laws of said Commonwealth. The Trust
shall be of the type referred to in Section 386.370 of the Kentucky General Laws
and of the type commonly called a Kentucky business trust, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in the City of Louisville, Kentucky for themselves and their assigns, as
of the day and year first above written.
/s/
------------------------------------
Morton H. Sachs
/s/
------------------------------------
O. Grant Bruton
/s/
------------------------------------
Carl T. Fischer, Jr.
/s/
------------------------------------
Raphael O. Nystrand
19
<PAGE> 25
THE COMMONWEALTH OF KENTUCKY
STATE OF KENTUCKY )
ss:
COUNTY OF JEFFERSON )
On this 26th day of December, 1980, before me personally appeared
MORTON H. SACHS, to me known to be the person described in and who executed the
foregoing instrument, and acknowledged that he executed the same as his free act
and deed.
WITNESS my hand and notarial seal this 26th day of December, 1980.
/s/
------------------------------------
Beverly Ann Porter
Notary Public
My commission Expires: 4/18/81
THE COMMONWEALTH OF KENTUCKY
STATE OF KENTUCKY )
ss:
COUNTY OF JEFFERSON )
On this 26th day of December, 1980, before me personally appeared O.
GRANT BRUTON, to me known to be the person described in and who executed the
foregoing instrument, and acknowledged that he executed the same as his free act
and deed.
WITNESS my hand and notarial seal this 26th day of December, 1980.
/s/
------------------------------------
Beverly Ann Porter
Notary Public
My commission expires: 4/18/81
20
<PAGE> 26
THE COMMONWEALTH OF KENTUCKY
STATE OF KENTUCKY )
ss:
COUNTY OF JEFFERSON )
On this 29th day of December, 1980, before me personally appeared CARL
T. FISCHER, JR., to me known to be the person described in and who executed the
foregoing instrument, and acknowledged that he executed the same as his free act
and deed.
WITNESS my hand and notarial seal this 29th day of December, 1980.
/s/
------------------------------------
Beverly Ann Porter
Notary Public
My Commission Expires: 4/18/81
THE COMMONWEALTH OF KENTUCKY
STATE OF KENTUCKY )
ss:
COUNTY OF JEFFERSON )
On this 26th day of December, 1980, before me personally appeared
RAPHAEL O. NYSTRAND, to me known to be the person described in and who executed
the foregoing instrument, and acknowledged that he executed the same as his free
act and deed.
WITNESS my hand and notarial seal this 26th day of December, 1980.
/s/
------------------------------------
Beverly Ann Porter
Notary Public
My Commission Expires: 4/18/81
21
<PAGE> 27
This instrument prepared by:
/s/ /s/
- ------------------------------ ------------------------------
JOHN J. DAVIS, III JAMES R. CUMMINS
Attorney at Law Attorney at Law
Greenebaum, Treitz & Maggiolo Brown, Cummins & Brown
25th Floor, First National Tower Six East Fourth Street
Louisville, Kentucky 40202 Cincinnati, Ohio 45202
22
<PAGE> 1
Exhibit 99.B1.2
CERTIFICATE
The undersigned, Secretary of The Fairmont Fund, hereby certifies that
the Amendment to the Agreement and Declaration of Trust of The Fairmont Fund has
been duly adopted by the Trust pursuant to Section 7.3 of the Agreement and
Declaration of Trust. The Agreement and Declaration of Trust was amended by the
attached instrument in writing signed by the President of the Trust pursuant to
the unanimous vote of the Trustees of the Trust at a meeting held on May 26,
1981.
/s/
------------------------------------
INDA M. WANGERIN, Secretary
The Fairmont Fund
Date: June 1, 1981
--------
<PAGE> 2
THE FAIRMONT FUND
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
Section 4.2 (g) of the Agreement and Declaration of Trust of The
Fairmont Fund is hereby amended to read as follows:
(g) Redemption by Trust. Each Share of each Series that has been
established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if
such Share was then being redeemed by the Shareholder pursuant
to subsection (f) of this Section 4.2 at any time if the
Trustees determine in their sole discretion that failure to so
redeem may have materially adverse consequences to all or any
of the holders of the Shares, or any Series thereof, of the
Trust, and upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price. In
addition, the Board of Trustees, in its sole discretion, may
require a Shareholder to redeem all of his Shares of any
Series after sixty days' notice, if the value of all of his
shares of that Series is less than the minimum amount
established from time to time by the Board of Trustees.
/s/ MORTON H. SACHS
------------------------------------
MORTON H. SACHS, President
This instrument prepared by:
/s/ JOHN J. DAVIS, III /s/ JAMES R. CUMMINS
- ------------------------------- ----------------------------------
JOHN J. DAVIS, III JAMES R. CUMMINS
Attorney at Law Attorney at Law
Greenebaum, Treitz & Maggiolo Brown, Cummins & Brown
25th Floor, 1st National Tower Six East Fourth Street
Louisville, Kentucky 40202 Cincinnati, Ohio 45202
STATE OF KENTUCKY )
COUNTY OF JEFFERSON )
Subscribed and sworn to before me by Morton H. Sachs this 1st day of
June, 1981.
My commission expires March 15, 1984
---------------
/s/ INDA M. WANGERIN
----------------------------
INDA M. WANGERIN
Notary Public
<PAGE> 1
Exhibit 99.B1.3
CERTIFICATE
The undersigned, Secretary of The Fairmont Fund, hereby certifies that
the attached Amendment to the Agreement and Declaration of Trust of The Fairmont
Fund has been duly adopted by the Trust pursuant to Section 7.3 of the Agreement
and Declaration of Trust. The Agreement and Declaration of Trust was amended by
the attached instrument in writing signed by the President of the Trust pursuant
to the unanimous vote of the Trustees of the Trust at a meeting held on May 15,
1984.
/s/ INDA M. WANGERIN
----------------------------
INDA M. WANGERIN, Secretary
The Fairmont Fund
Date: May 15 , 1984
-------
<PAGE> 2
THE FAIRMONT FUND
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
Section 5.1 of the Agreement and Declaration of Trust of The Fairmont
Fund is hereby amended to read as follows:
Section 5.1 Voting Powers. The Shareholders shall have power
to vote only (i) for the election or removal of Trustees as
provided in Section 3.1, (ii) with respect to any contract
with a Contracting Party as provided in Section 3.3 as to
which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust
or any Series to the extent and as provided in Sections 7.1
and 7.2, (iv) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Section
7.3, (v) to the same extent as the stockholders of a Kentucky
business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or the Shareholders, and (vi) with respect to such
additional matters relating to the Trust as may be required by
the 1940 Act, this Declaration of Trust, the ByLaws or any
registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may
consider necessary or desirable. Shares may be voted in person
or by proxy. A proxy with respect to Shares held in the name
of two or more persons shall be valid if executed by any one
of them unless at or prior to exercise of the proxy the Trust
receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or
prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take
any action required by law, this Declaration of Trust or the
By-Laws to be taken by Shareholders.
THE FAIRMONT FUND
By /s/
-------------------------------
OSCAR S. BRYANT, JR., President
This instrument prepared by:
/s/ /s/
- -------------------------------- -------------------------------------
JOHN S. GREENEBAUM, DONALD S. MENDELSOHN,
Attorney at Law Attorney at Law
Greenebaum Young Treitz & Maggiolo Brown, Cummins & Brown Co., L.P.A.
25th Fl., First National Tower Six East Fourth Street, Suite 1400
Louisville, Kentucky 40202 Cincinnati, Ohio 45202
STATE OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )
Subscribed and sworn to before me on behalf of The Fairmont Fund by
OSCAR S. BRYANT, JR., its President, this 17th day of May , 1984.
/s/
------------------------------------
My Commission Expires: March 15, 1988 INDA M. WANGERIN
Notary Publi
<PAGE> 1
Exhibit B1.4
CERTIFICATE
The undersigned, Secretary of The Fairmont Fund Trust, hereby certifies
that the attached Amendment No. 3 to the Agreement and Declaration of Trust of
The Fairmont Fund Trust has been duly adopted by the Trust pursuant to Section
7.3 of the Agreement and Declaration of Trust. The Agreement and Declaration of
Trust was amended by the attached instrument in writing signed by the President
of the Trust pursuant to the unanimous vote of the Trustees of the Trust at a
meeting held on October 28, 1986.
/s/
---------------------------------
INDA M. WANGERIN, Secretary
The Fairmont Fund Trust
Date: October 28, 1986
<PAGE> 2
THE FAIRMONT FUND TRUST
AMENDMENT NO. 3 TO AGREEMENT AND DECLARATION OF TRUST
Section 1.1 of the Agreement and Declaration of Trust of The Fairmont
Fund Trust is hereby amended to read as follows:
Section 1.1 Name and Principal Office. This Trust shall be
known as "The Fairmont Fund Trust" and the Trustees shall conduct the
business of the Trust under that name or any other name as they may
from time to time determine. The principal office of the Trust shall be
located at 2705 Citizens Plaza, Louisville, Kentucky or such other
location as the Trustees may from time to time determine.
Pursuant to Section 4.1 of the Agreement and Declaration of Trust of
The Fairmont Fund Trust and effective upon the execution of this document, the
undersigned, being a majority of the Trustees of The Fairmont Fund Trust, hereby
establish a new series of shares of the Trust and designate such series "The
Warrior Fund." The relative rights and preferences of The Warrior Fund series of
shares shall be those rights and preferences set forth in Section 4.2 of the
Agreement and Declaration of Trust of The Fairmont Fund Trust.
This document shall have the status of an amendment to said Agreement
and Declaration of Trust.
THE FAIRMONT FUND TRUST
By /s/
---------------------------------
OSCAR S. BRYANT, JR., PRESIDENT
STATE OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )
Subscribed and sworn to before me on behalf of The Fairmont Fund Trust
by OSCAR S. BRYANT, JR., its President, this 28th day of October, 1986.
/s/
---------------------------------
Inda M. Wangerin
Notary Public
My Commission Expires:
March 15, 1988
- --------------------------------
This instrument prepared by:
/s/
- --------------------------------
KAREN M. MCLAUGHLIN
Attorney at Law
Brown, Cummins & Brown Co., L.P.A.
Six East Fourth Street, Suite 1400
Cincinnati, Ohio 45202
<PAGE> 1
Exhibit B1.5
CERTIFICATE
The undersigned, Secretary of The Fairmont Fund Trust, hereby certifies
that the attached Amendment No. 4 to the Agreement and Declaration of Trust of
The Fairmont Fund Trust has been duly adopted by the Trust pursuant to Section
7.3 of the Agreement and Declaration of Trust. The Agreement and Declaration of
Trust was amended by the attached instrument in writing signed by the President
of the Trust pursuant to the unanimous vote of the Trustees of the Trust at a
meeting held on April 28, 1988. The Board of Trustees was authorized to so amend
the Agreement and Declaration of Trust by the shareholders holding a majority of
the shares of the Trust at a meeting held on April 28, 1988.
/s/
--------------------------------
INDA M. WANGERIN, Secretary
The Fairmont Fund Trust
Date: April 28, 1988
<PAGE> 2
THE FAIRMONT FUND TRUST
AMENDMENT NO. 4 TO AGREEMENT AND DECLARATION OF TRUST
"Resolved, that Section 3.1(c) of the Agreement and Declaration of Trust be, and
it hereby is, amended to read as follows:
Section 3.1 (c) Term. Each Trustee shall serve as a Trustee during the lifetime
of the Trust and until its termination as hereinafter provided or until such
Trustee sooner dies, resigns, retires or is removed. The Trustees may elect
their own successors and may, pursuant to Section 3.1(f) hereof, appoint
Trustees to fill vacancies.
FURTHER RESOLVED, that Section 3.1(e) of the Agreement and Declaration of Trust
be, and it hereby is, amended to read as follows:
Section 3.1(e) Removal. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date upon which such removal
shall become effective, (ii) by vote of the Shareholders holding not less than
two-thirds of the Shares then outstanding, cast in person or by proxy at any
meeting called for the purpose, or (iii) by a declaration in writing signed by
Shareholders holding not less than two-thirds of the Shares then outstanding and
filed with the Trust's Custodian.
FURTHER RESOLVED, that Section 5.2 of the Agreement and Declaration of Trust be,
and it hereby is, amended to read as follows:
Section 5.2 Meetings. Meetings (including meetings involving only the holders of
Shares of one or more but less than all series) of Shareholders may be called by
the Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as required by the
provisions of the 1940 Act of as herein provided or upon any other matter deemed
by the Trustees to be necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days before such meeting, postage prepaid, stating
the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. If the Trustees
shall fail to call or give notice of any meeting of Shareholders (including a
meeting involving only the holders of Shares of one or more but less than all
Series) for a period of 30 days after written application by Shareholders
holding at least 25% of the Shares then outstanding requesting a meeting be
called for any other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least 25% of the Shares
then outstanding may call and give notice of such meeting, and thereupon the
meeting shall be held in the manner provided for herein in case of call thereof
by the Trustees."
This document shall have the status of an amendment to said Agreement
and Declaration of Trust.
THE FAIRMONT FUND TRUST
By:/s/
-------------------------------
OSCAR S. BRYANT, JR., PRESIDENT
<PAGE> 3
STATE OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )
Subscribed and sworn to before me on behalf of The Fairmont Fund Trust
by OSCAR S. BRYANT, JR., its President, this 28th day of April, 1988.
/s/
--------------------------------
Notary Public
My Commission Expires: 1/9/90
This instrument prepared by:
/s/
- ------------------------------------
KAREN M. MCLAUGHLIN,
Attorney at Law
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower
441 Vine Street
Cincinnati, OH 45202
<PAGE> 1
Exhibit B1.6
CERTIFICATE
The undersigned, Secretary of The Fairmont Fund Trust, hereby certifies
that the attached Amendment No. 5 to the Agreement and Declaration of Trust of
The Fairmont Fund Trust has been duly adopted by the Trust pursuant to Section
7.3 of the Agreement and Declaration of Trust. The Agreement and Declaration of
Trust was amended by the attached instrument in writing signed by the President
of the Trust pursuant to the unanimous vote of the Trustees of the Trust at a
meeting held on September 11, 1990.
/s/
--------------------------------
INDA M. WANGERIN, Secretary
The Fairmont Fund Trust
<PAGE> 2
THE FAIRMONT FUND TRUST
AMENDMENT NO. 5 TO AGREEMENT AND DECLARATION OF TRUST
Pursuant to Section 4.1 of the Agreement and Declaration of Trust of
The Fairmont Fund Trust, a majority of the Trustees of The Fairmont Fund Trust
at a meeting held on September 11, 1990 established two new series of shares of
the Trust and designated such series "Premier Care Income Fund" and "Premier
Care Tennessee Tax Free Fund." The relative rights and preferences of these new
series of shares shall be those rights and preferences set forth in Section 4.2
of the Agreement and Declaration of Trust of The Fairmont Fund Trust.
This document shall have the status of an amendment to said Agreement
and Declaration of Trust.
THE FAIRMONT FUND TRUST
By:/s/
--------------------------------
Morton H. Sachs
Chairman of the Board
STATE OF KENTUCKY )
) ss:
COUNTY OF JEFFERSON )
Subscribed and sworn to before me on behalf of The Fairmont Fund Trust
by Morton H. Sachs, as Chairman of the Trust , this 11th day of September, 1990.
/s/
--------------------------------
Inda M. Wangerin
Notary Public
My Commission Expires: 3/15/92
This Instrument Prepared By:
/s/
- -----------------------------
DONALD S. MENDELSOHN
Attorney at Law
Brown, Cummins & Brown Co., L.P.A.
3500 Carew Tower, 441 Vine Street
Cincinnati, Ohio 45202
<PAGE> 1
Exhibit B5
MANAGEMENT AGREEMENT
TO: MORTON H. SACHS & CO.
1346 South Third Street
Louisville, Kentucky 40208
Dear Sirs:
The Fairmont Fund Trust (hereinafter referred to as the "Trust")
herewith confirms our agreement with you as follows:
The Trust has been organized as a business trust under the laws of the
Commonwealth of Kentucky to engage in the business of an investment company. The
Trust currently offers two series of shares to investors, The Fairmont Fund
series and The Warrior Fund series. The Trust's Board of Trustees (the "Board")
has selected you to act as the sole investment adviser of the Trust and to
provide certain other services, as more fully set forth below, and you are
willing to act as such investment adviser and to perform such services under the
terms and conditions hereinafter set forth. Accordingly, the Trust agrees with
you as follows upon the date of the execution of this Agreement.
1. ADVISORY SERVICES
You will regularly provide the Trust with such investment
advice as you in your discretion deem advisable and will furnish a continuous
investment program for the Trust's series consistent with each series'
investment objectives and policies. You will determine the securities to be
purchased for each series' portfolio, the portfolio securities to be held or
sold by each series, and the portion of each series' assets to be held
uninvested, subject always to the provisions of the Trust's Declaration of Trust
and By-Laws and the provisions of the Investment Company Act of 1940; and
subject to the respective series' investment objectives, policies and
restrictions, as each of the same shall be from time to time in effect; and
subject further to such policies and instructions as the Board may from time to
time establish and forward to you in writing. You will advise and assist the
officers of the Trust in taking such steps as are necessary or appropriate to
carry out the decisions of the Board and the appropriate committees of the Board
regarding the conduct of the business of the Trust.
As a registered broker-dealer, you also agree to distribute
the Trust's shares in states in which you are qualified to do so, upon the
request of the Trust. You will accept orders for the purchase of the Trust's
shares at net asset value only, and no sales commission, fee or other charge
will be made to the investor. You will receive no additional compensation for
acting as the Trust's distributor and no portion of your fee hereunder will be
deemed to constitute a distributor's fee or brokerage commission.
2. ALLOCATION OF CHARGES AND EXPENSES
You will pay all operating expenses of the Trust, including
the compensation and expenses of any trustees, officers and employees of the
Trust and of any other persons rendering any services to the Trust; clerical and
shareholder service staff salaries; office space and other office expenses; fees
and expenses incurred by the Trust in connection with membership in investment
company organizations; legal, auditing and accounting expenses; expenses of
registering shares under
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federal and state securities laws; insurance expenses; fees and expenses of the
custodian, transfer agent or dividend disbursing agent of the Trust; expenses
including clerical expenses of issue, sale, redemption or repurchase of shares
of the Trust; the cost of preparing and distributing reports and notices to
shareholders; the cost of printing or preparing prospectuses and Statements of
Additional Information for delivery to the Trust's shareholders; the cost of
printing or preparing stock certificates or any other documents, statements or
reports to shareholders; expenses of shareholders' meetings and proxy
solicitations; and all other operating expenses of the Trust not specifically
assumed by the Trust. You will not pay any expenses pursuant to this Agreement
for any activity which is primarily intended to result in the sale or
distribution of Trust shares, although you may make such payments out of your
own resources.
The Trust will pay all brokerage fees and commissions, taxes,
interest, expenses incurred by the Trust in connection with the organization and
registration of shares of any series of the Trust established after the date of
this Agreement, and such extraordinary or non-recurring expenses as may arise,
including litigation to which the Trust may be a party and indemnification of
the Trust's trustees and officers with respect thereto.
3.COMPENSATION OF THE ADVISER
For all of the services to be rendered and payments to be made
as provided in this Agreement, The Fairmont Fund series and The Warrior Fund
series each will pay you, on the last day of each month, a fee at the annual
rate of 2% of the average value of the daily net assets of the series up to and
including $10 million, 1-1/2% of such assets of the series from $10 million to
and including $30 million and 1% of such assets of the series in excess of $30
million. The Trust and you acknowledge that none of this fee is intended to
provide money to you to finance the distribution of the Trust's shares. Your
compensation with respect to each additional series of the Trust established
after the date of this Agreement shall be the fee described above unless the
Board of Trustees, including a majority of the Trustees who are not interested
persons as defined in the Investment Company Act of 1940 of you or the Trust,
determines otherwise. If the Board of Trustees adopts a different fee
arrangement for an additional series, the fee arrangement shall be proved
pursuant to the provisions of section 15 of the Investment Company Act of 1940.
The average value of the daily net assets of a series shall be
determined pursuant to the applicable provisions of the Declaration of Trust of
the Trust or a resolution of the Board, if required. If, pursuant to such
provisions, the determination of net asset value of a series is suspended for
any particular business day, then for the purposes of this paragraph, the value
of the net assets of the series as last determined shall be deemed to be the
value of the net assets as of the close of the business day, or as of such other
time as the value of the series' net assets may lawfully be determined, on that
day. If the determination of net asset value of a series has been suspended for
a period including such month, your compensation payable at the end of such
month shall be computed on the basis of the value of the net assets of the
series as last determined (whether during or prior to such month).
You agree that your compensation during any fiscal year shall
be reduced by an amount, if any, by which the expenses of the Trust or a series
for such fiscal year exceed the lowest applicable expense limitation applicable
to the Trust or the series imposed by state
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securities administrators in states where the series' shares are qualified for
sale, as such limitations may be lowered or raised from time to time. The
payment of your compensation at the end of any month will be reduced or
postponed or, if necessary, a refund made to the Trust or the series as soon as
practicable, so that at no time will there be any accrued but unpaid liability
over the above expense limitation. You shall refund to the Trust or the series
within sixty days after the close of each year, the amount of any additional
reduction of your compensation pursuant to this paragraph, provided, however,
that you will not be required to pay the Trust or the series an amount greater
than the fee paid to you by the Trust or the series in respect of such year
pursuant to this Agreement. As used in this paragraph "expenses" shall mean
those expenses included in the applicable expense limitation having the broadest
specification thereof (certain expenses such as brokerage commissions, if any,
taxes, interest and extraordinary items are excluded from such limitations), and
"expense limitation" means a limit on the maximum annual expenses which may be
incurred by an investment company or a series of an investment company
determined (1) by multiplying a fixed percentage by the average or multiplying
more than one such percentage by different specified amounts of the average of
the values of the net assets of the investment company or the series for a
fiscal year or (2) by multiplying a fixed percentage of the net investment
income of the investment company or percentage of the net investment income of
the investment company or the series for a fiscal year. The words "lowest
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Trust.
4.EXECUTION OF PURCHASE AND SALE ORDERS
In connection with purchases or sales of portfolio securities
for the account of the Trust, it is understood that you will arrange for the
placing of all orders for the purchase and sale of portfolio securities for the
Trust's account with brokers or dealers selected by you, subject to review of
this selection by the Board from time to time. You will be responsible for the
negotiation and the allocation of principal business and portfolio brokerage. In
the selection of such brokers or dealers and the placing of such orders, you are
directed at all times to seek for the Trust the best qualitative execution,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer.
You should generally seek favorable prices and commission
rates that are reasonable in relation to the benefits received. In seeking best
qualitative execution, you are authorized to select brokers or dealers who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Trust and/or the other
accounts over which you exercise investment discretion. You are authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a Trust portfolio transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if you determine in good faith that the amount of the
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker or dealer. The determination may be
viewed in terms of either a particular transaction or your overall
responsibilities with respect to the Trust and to accounts over which you
exercise investment discretion. The Trust and you understand and acknowledge
that, although the information may be useful to the Trust and you, it is not
possible to place a dollar value on such information. It is the Trust's opinion,
as well as your opinion, that the review and study of this information will not
reduce the overall cost
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<PAGE> 4
to you in performing your duties to the Trust under this Agreement. The Board
shall periodically review the commissions paid by the Trust to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits of the Trust.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking best qualitative
execution, you may give consideration to sales of shares of the Trust as a
factor in the selection of brokers and dealers to execute Trust portfolio
transactions.
You may retain compensation in connection with effecting Trust
transactions executed through others, provided that such compensation does not
exceed the lesser of (i) the usual and customary broker's commission for the
transaction or (ii) the maximum amount permitted by the Investment Company Act
of 1940. If any occasion should arise in which you give any investment advice to
your clients concerning Trust shares, you will act solely as investment counsel
for such client and not in any way on behalf of the Trust. Your services to the
Trust pursuant to this Agreement are not to be deemed to be exclusive and it is
understood that you may render investment advice, management and other services
to others, including other registered investment companies.
5.LIMITATION OF LIABILITY OF ADVISER
You (including your officers, directors, employees, control
persons and affiliates of any thereof) shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from your reckless disregard of your obligations
and duties under this Agreement. Any person employed by you who may also be or
become an employee of the Trust shall be deemed, when acting within the scope of
his employment by the Trust, to be acting in such employment solely for the
Trust and not as your employee or agent.
6.DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall remain in force for a period of two (2)
years from the date of its execution with respect to each of the Trust's series
registered for sale in a public offering on the date of such execution and, with
respect to any additional series registered after the date of execution, until
the next anniversary date of the Agreement following the date on which such
series becomes effectively registered for sale in a public offering, and from
year to year thereafter as to each series of the Trust's shares, subject to
annual approval by (i) the Board or (ii) a vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of such
series, provided that in either event continuance is also approved by a majority
of the trustees who are not "interested persons" as defined in the Investment
Company Act of 1940 of you or of the Trust, by a vote cast in person at a
meeting called for the purpose of voting such approval.
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If the shareholders of any series of the Trust's shares fail
to approve the Agreement in the manner set forth above, upon the request of the
Board you will continue to serve or act in such capacity for the series for the
period of time pending required approval of the Agreement, of a new agreement
with you or a different adviser or other definitive action; provided that the
compensation to be paid by the Trust to you for services to and payments on
behalf of the series will be equal to the lesser of your actual costs incurred
in furnishing such services and payments or the amount you would have received
under this Agreement for furnishing such services and payments.
This Agreement may, on sixty days written notice, be
terminated at any time without the payment of any penalty, by the Board, by a
vote of a majority of the outstanding voting securities of the Trust or by you.
This Agreement shall automatically terminate in the event of its assignment.
7.USE OF NAME
The parties hereto acknowledge that all rights to the name
"Fairmont" belong to Morton H. Sachs & Co. and that the Trust is being granted a
limited license to use such word in its Trust name or in any series name. In the
event Morton H. Sachs & Co. ceases to be the adviser to the Trust, the Trust's
right to the use of the name "Fairmont" shall automatically cease on the
thirtieth day following the termination of this Agreement. The right to the name
may also be withdrawn by Morton H. Sachs & Co. during the term of this Agreement
upon thirty (30) days' written notice by it to the Trust. Nothing contained
herein shall impair or diminish in any respect, Morton H. Sachs & Co.'s right to
use the name "Fairmont" in the name of or in connection with any other business
enterprises with which you are or may become associated. There is no charge to
the Trust for the right to use this name.
8.AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived,
discharged or terminated orally, and no amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the outstanding
voting securities of the series to which the amendment relates and by the Board,
including a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on such
approval.
9.LIMITATION OF LIABILITY
The term "THE FAIRMONT FUND TRUST" means and refers to the
Trustees from time to time serving under the Trust's Declaration of Trust as the
same may subsequently thereto have been, or subsequently hereto be, amended. It
is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the Trust property of the
Trust, as provided in a Declaration of Trust of the Trust. The execution and
delivery of this agreement has been authorized by the Trustees and shareholders
of the Trust and signed by the officers of the Trust, acting as such, and
neither such authorization by such
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Trustees and shareholders nor such execution and delivery by such officers shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the Trust property of
the Trust as provided in its Declaration of Trust.
10. MISCELLANEOUS
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same Agreement.
<PAGE> 7
If you are in agreement with the foregoing, please sign the
form of acceptance on the accompanying counterpart of this letter and return
such counterpart to the Trust, whereupon this letter shall become a binding
contract upon the date thereof.
Yours very truly,
THE FAIRMONT FUND TRUST
ATTEST:
/s/ By/s/
- ------------------------------ ---------------------------------
INDA M. WANGERIN, Secretary OSCAR S. BRYANT, JR., President
Dated as of May 7, 1987
ACCEPTANCE
The foregoing Agreement is hereby accepted.
ATTEST: MORTON H. SACHS & CO.
/s/ By/s/
- ------------------------------ ---------------------------------
INDA M. WANGERIN, Secretary MORTON H. SACHS, President
Dated as of May 7, 1987
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<PAGE> 1
Exhibit B11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use in this Post-Effective Amendment Number 24 to The Fairmont
Fund's Registration Statement on Form N-1A of our report dated January 13, 1998
on the financial statements of The Fairmont Fund and the Summary Financial
Information included in the Prospectus and to the references made to us under
the caption "Condensed Financial Information" included in the Prospectus and
under the caption "Auditors" included in the Statement of Additional
Information.
/s/
- ------------------------------------
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
April 29, 1998
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<PAGE> 1
Exhibit B13
May 26, 1981
The Fairmont Fund
2705 Citizens Plaza
Louisville, Kentucky 40202
Gentlemen:
The undersigned, having purchased a portion of the initial shares of
beneficial interest in The Fairmont Fund on May 26, 1981 does hereby represent
that such purchase was for investment purposes and he has no present intention
of redeeming or reselling said sahres.
/s/
---------------------------------
MORTON H. SACHS
<PAGE> 1
Exhibit B14
LIBERTY - FAIRMONT IRA MASTER PLAN
Liberty National Bank and Trust Company of Louisville (hereinafter
Liberty National Bank) hereby establishes an Individual Retirement Account
Master Plan for the exclusive benefit and convenience of such of its customers
who qualify and wish to adopt it. If an Individual executes an IRA Adoption
Agreement which is accepted by the Custodian and which incorporates this Master
Plan by reference, the bank will act as Custodian of the Individual Retirement
Account thereby created under the following terms and conditions:
ARTICLE I
DEFINITIONS
"Account" means the Individual Retirement Account or Accounts
established by the Custodian under this Plan in the name of the Individual.
"Beneficiary" includes the estate of the Individual, dependents of the
Individual, and any person designated by the Individual to share in the benefits
of the Account after the death of the Individual. The Individual shall designate
his Beneficiary or Beneficiaries by filing with the Custodian a written
designation identifying such Beneficiary. Such designation may be changed or
revoked by written notice to the Custodian. If there is no Beneficiary to
receive any amounts which become payable to a Beneficiary under the terms of the
Plan, the Custodian will pay such amounts in a lump-sum to the estate of the
Individual.
"Compensation" means wages, salaries, or professional fees, and other
amounts received for personal services actually rendered (including but not
limited to, commissions paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance premiums, tips and bonuses)
and includes earned income as defined in Section 401 (c) (2) of the Internal
Revenue Code but does not include amounts received as earnings or profits from
property (including but not limited to, interest and dividends) or amounts not
includable in gross income such as income from sources without the United States
excluded from gross income under Section 911 of the Internal Revenue Code.
"Custodian" means Liberty National Bank and Trust Company of
Louisville.
"The Fairmont Fund" means a Kentucky Business Trust authorized to offer
for sale an unlimited number of shares of beneficial interest, without par
value.
"Effective Date" means the date on which the Custodian accepts its
appointment hereunder.
"Individual" means any person who adopts the Master Plan of the
Custodian as his Individual Retirement Account. Where Spouses open Accounts it
shall refer to each Spouse.
"Investment Adviser" means Morton H. Sachs & Co., or its successor.
"IRA Adoption Agreement" means the document attached hereto by which an
Individual elects to establish a qualified Individual Retirement Account under
the terms of this Master
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Plan.
"Plan" means the Master Plan as embodied herein.
"Qualified Retirement Plan" means a plan qualified under Section 401(a)
of the Internal Revenue Code (including Self-Employed Retirement Plans) and
exempt from tax under Section 501(a) of the Internal Revenue Code, an annuity
plan described in Section 403(a) of the Internal Revenue code, a qualified bond
purchase plan described in Section 405(a) of the Internal Revenue Code, a plan
established for its employees by the United States, by a State or political
division thereof, or by an agency or instrumentality of any of the foregoing, or
where amounts were contributed to an employer for an annuity contract or
custodial account for regulated investment company stock described in Section
403(b) of the Internal Revenue Code.
"Spouse" means an Individual's husband or wife as determined in
accordance with Section 143(a) of the Internal Revenue Code.
"Taxable Year" means the taxable year used by the Individual for
Federal income tax purposes.
"Transfer Agent" means Bartlett & Co., or its successor, which serves
as transfer agent for the Fairmont Fund.
"Simplified Pension Plan" means an employer sponsored Account complying
with the requirements of Section 408(k) of the Internal Revenue Code.
ARTICLE II
CONTRIBUTIONS
1. For Taxable Years commencing on or after January 1, 1982:
(a) An Individual during any Taxable Year or before he timely
files his tax return for the Taxable Year may elect to open a Regular Individual
Retirement Account, and may voluntarily contribute to his Account an amount in
cash up to the lesser of $2,000.00 or 100% of his Compensation for such Taxable
Year, provided that during such Taxable Year, the Individual has not attained
age 70-1/2.
(b) During any Taxable Year or before a tax return for the
Taxable Year is timely filed, Spouses may voluntarily make a combined
contribution to their separate Accounts of an amount equal to the lesser of: (1)
100% of the working Spouse's Compensation; or (2) $2,250. In no event shall
either account receive a contribution in excess of $2,000. However, Spouses
shall only be eligible to contribute such amounts to their separate Accounts if:
(1) The Spouses are considered married in accordance with Section 143(a); (2)
One Spouse did not have any Compensation during the Taxable Year, and (3) The
Spouses file a joint return for the Taxable Year. A divorced non-working Spouse
may continue to make contributions to the Spousal Account established while he
was married if: (1) The Spousal Account was established at least 5 years prior
to the beginning of the calendar year in which the divorce
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decree or decree of separate maintenance was issued by a court; and (2)
deductible contributions were made to the Account in 3 out of the 5 most recent
Taxable Years ending before the Taxable Year in which the decree of divorce or
separate maintenance was issued. Such a divorced Spouse may continue to make
contributions to his Spousal Account in an amount of cash up to the lesser of
$1,125 or 100% of his Compensation plus any taxable alimony for the Taxable
Year.
(c) An Employer may contribute to a Simplified Pension Plan on
the behalf of his employee an amount of cash up to the lesser of $15,000 or 15%
of the employee's includible compensation. (For employees who are shareholders,
officers, owner-employees, the above limitation is reduced by any
self-employment tax or employer-paid FICA tax that is taken into account in
determining the amount of employer contributions.)
(d) An Individual may make an allowable contribution to his
Account described in subsection (a) in addition to the Employer's contribution
described in subsection (c).
2. An Individual or the Spouse of a deceased Individual may contribute
to an Account established by him all or a portion of the amount distributed to
him from a Qualified Retirement Plan excepting certain government plans which
are not intended to satisfy Section 401(a) of the Internal Revenue Code
provided:
(a) Such Individual was not Self-Employed under such Qualified
Retirement Plan within the Meaning of Section 401(c) (1) of the Internal Revenue
Code;
(b) The Amount distributed to the Individual or Spouse is
transferred to his Account no later than the sixtieth (60th) day after such
distribution was received;
(c) The distribution from the Qualified Retirement Plan
constituted the Individual's or his deceased Spouse's entire interest in such
plan and was distributed to him within one Taxable Year as a lump-sum
distribution or is a result of termination of such plan;
(d) The Amount contributed to the Account shall not exceed the
amount the Individual or the Spouse of a deceased Individual received in the
distribution from the Qualified Retirement Plan, reduced by Employee
contributions (other than deductible employee contributions within the meaning
of Section 72(o) (5) of the Internal Revenue Code); and
(e) the contribution is made in cash.
Amounts contributed in accordance with this Section 2 of Article II
shall be held in an Account for the Individual which is separate and apart from
the Account established to hold contributions made by the Individual in
accordance with Section 1 of Article II. Such Account shall be designated as the
Individual's Rollover Account.
3. During any Taxable Year, an Individual may contribute to his Account
amounts held by another Custodian, Trustee, or funding agent as an individual
retirement account for said Individual, provided
(a) the amount distributed to the Individual from such
individual retirement account is transferred to his Account no later than the
sixtieth day after such distribution is
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received by the Individual,
(b) the contribution is made in cash, and
(c) the Individual declares to the Custodian that the
contribution consists solely of amounts transferred from such individual
retirement account, and that the Individual has not made any similar transfer
within the one-year period ending on the date of receipt of the distribution
from his individual retirement account.
Amounts contributed in accordance with this Section 3 of Article II
shall be deposited in the Account to which the Individual makes contributions in
accordance with Section 1 of Article II. However, if such contributions
represent a prior rollover from a Qualified Retirement Plan, such contributions
shall be deposited and held in a Rollover Account for the Individual in
accordance with Section 2 of Article II.
4. If, during a Taxable Year, contributions in accordance with Section
1, Article II exceed the amount specified in those sections, such excess,
together with any earnings thereon, shall upon written request by the Individual
be returned to the Individual by the Custodian. At the request of the
Individual, the Custodian shall, in lieu of returning such excess and earnings
thereon, apply such amounts as a contribution in accordance with Section 1 of
Article II for the next succeeding Taxable Year.
ARTICLE III
ACCOUNTS OF MEMBERS
1. The Custodian shall establish an Account or Accounts in the name of
each Individual. The assets of the Account will not be co-mingled with other
property.
2. No part of the Individual's Account shall be invested in life
insurance contracts.
The contribution made under the Plan shall be invested exclusively in
either or both of the following investments: (a) one or more time deposit
accounts in the name of the Individual in the savings department of the
Custodian; and (b) shares in the Fairmont Fund. The investment of an
Individual's contributions in such investments shall be designated by him on the
appropriate instruments provided by the Custodian and/or the Investment Adviser.
The Individual shall not designate an investment in the Fairmont Fund of an
amount less than the minimal amount required for investment in such fund. In the
event that the Individual fails to maintain the minimal amount required for
continued investment in the Fairmont Fund and thereby causes redemption of his
shares in the Fairmont Fund, the Individual shall, in advance of such redemption
or immediately thereafter direct the Custodian as to the investment of such
amount received by the Custodian from the Transfer Agent as a result of such
redemption.
The Custodian will invest all contributions designated to be invested
in the Fairmont Fund in such fund within a reasonable time after receipt of such
amounts or within a reasonable time from receiving such directions, whichever is
later.
3. The Individual's interest in his Account shall be nonforfeitable at
all times. However, no Individual shall have any right to pledge any part of his
Account as security for
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a loan or to assign, transfer, appropriate, encumber, commute, or anticipate his
interest in his Account, or any payments to be made thereunder, and no benefit,
rights or interest of an Individual shall be in any way subject to any legal
process to levy upon, garnish, or attach the same for payment of any claim
against an Individual except as may be provided by law, nor shall the Individual
have any right of any kind whatsoever with respect to his Account or any estate
or any interest therein, or with respect to any other property or rights, other
than the rights to receive such distributions as are made out of his Account as
and when the same respectively are or shall become due and payable under the
terms of this Master Plan. Where the IRA Adoption Agreement attached to this
Plan is checked for Spousal Accounts, separate custodial Accounts will be opened
and maintained in each Spouse's name. Contributions made on behalf of each
Spouse will be credited to that Spouse's separate Account.
ARTICLE IV
DISTRIBUTION OF ACCOUNTS
1. The entire interest of the Individual in his Account must be, or
commence to be, distributed before the close of the Taxable Year in which the
Individual attains age 70-1/2. Not later than the close of such taxable year the
Individual may elect, in a form and at such times as may be acceptable to the
Custodian, to have the balance of his Account distributed in:
(a) a single sum payment,
(b) equal or substantially equal monthly, quarterly or annual
payments commencing at the close of such taxable year calculated to extend over
the life of the Individual,
(c) equal or substantially equal monthly, quarterly or annual
payments commencing at the close of such taxable year calculated to extend over
a period certain which is not greater than the life expectancy of the
Individual, or
(d) equal or substantially equal monthly, quarterly or annual
payments commencing at the close of such taxable year calculated to extend over
a period certain which is not greater than the joint life and last survivor
expectancy of the Individual and his spouse.
Anything in this Section 1 of Article IV to the contrary notwithstanding,
payments in accordance with (a), (b), (c), (d), or (e) above will continue only
so long as amounts remain in the Individual's Account. Once an Individual's
Account is exhausted, the Custodian shall be relieved of any and all liability
to make payments to the Individual, his spouse, or Beneficiary. If the
Individual fails to elect any of the methods of distribution described above on
or before the close of his taxable year in which he attains the age of 70-1/2,
distribution to the Individual will be made prior to the close of such taxable
year by a single sum payment. If the Individual elects a mode of distribution
under (b), (c), (d) or (e) above, the monthly, quarterly or annual payments will
be determined as follows:
(1) By a quotient determined by dividing the entire interest
of the Individual in his Account at the beginning of each year by the life
expectancy of the Individual (or the joint life and last survivor expectancy of
the Individual and his spouse, or the period specified
5
<PAGE> 6
under (d) and (e) whichever is applicable), determined in either case as of the
date the Individual attains age 70-1/2, reduced by the number of whole years
elapsed since the Individual's attainment of age 70-1/2, or
(2) by any other method which may be prescribed by regulation
promulgated by the Secretary of the Treasury or his delegate.
2. If the death of the Individual occurs before his entire interest in
his Account is distributed to him, or if distribution has been commenced as
provided in (c) or (e) of Section 1 of Article IV to his surviving spouse and
the death of such surviving spouse occurs before the entire interest is
distributed to such spouse, the Custodian within five years after the
Individual's death (or the death of the spouse as the case may be) shall
distribute the entire remaining undistributed interest to the Beneficiary or
Beneficiaries of the Individual or his surviving spouse in a lump-sum or the sum
payment, the entire remaining undistributed interest be applied to purchase an
immediate annuity for such Beneficiary or Beneficiaries (or Beneficiary of the
surviving spouse as the case may be). The terms of such annuity shall provide
for payments over the life of the Beneficiary or Beneficiaries or for a term
certain not exceeding the life expectancy of such Beneficiary or Beneficiaries.
Any annuity contract so purchased shall be immediately distributed to such
Beneficiary or Beneficiaries. No such annuity shall be purchased if under (d) or
(e) above. If no election to purchase an annuity is made by the Beneficiary
within five years following the death of the Individual or surviving spouse, a
lump-sum payment with respect to such Individual's Account will be paid to the
Beneficiary or Beneficiaries at the end of such five year period as described
above. For the purposes of this Section 2 of Article IV, a certified death
certificate shall constitute due proof of death of the Individual and/or his
surviving spouse.
3. In the event an Individual becomes an active participant in a
Qualified Retirement Plan and the Individual has previously established a
Rollover Account, said Individual may transfer his Rollover Account to such
Qualified Retirement provided such Plan permits such transfers and provided such
transfers are not made to an annuity contract or custodial account described in
Section 403 (b) of the Internal Revenue Code or to certain government plans
which are not intended to satisfy Section 401(a) of the Internal Revenue Code. A
transfer may be made to an annuity or custodial account described in Section 403
(b) of the Internal Revenue Code in the event that the assets in the Rollover
Account consists solely of the amount rolled over from an annuity or custodial
account described in Section 403(b) of the Internal Revenue Code and any
earnings thereon.
4. At any time, the Individual may remove the Custodian and direct it
to make a distribution to the Individual of the balance held in the Individual's
Account. The Custodian shall make such distribution not later than sixty days
following such removal. Except in the case of the Individual's death or
disability (as defined in Section 72(m) of the Internal Revenue Code) or
attainment of age 59-1/2, before distributing an amount from his Account, the
Custodian shall receive from the Individual a statement signed by the Individual
indicating the Individual's intention as to the disposition of the amount
distributed.
6
<PAGE> 7
ARTICLE V
DUTIES AND POWERS
1. It shall be the duty of the Custodian to maintain an Account in the
name of the Individual and to make payments and distributions as directed by the
Individual. The Custodian shall be responsible and accountable only for the
contributions received by it. The Investment Adviser shall assist the Custodian
in the establishment of the Account for an Individual, and shall provide the
Individual not only with the appropriate forms in regard to this Plan but also
the appropriate Prospectus and application for investment of the Account in the
Fairmont Fund. The Transfer Agent shall assist the Custodian in maintaining the
Account. Such assistance shall include, but not be limited to, the following:
(1) providing information to the Custodian as to the value of the Individual's
interest in the Fairmont Fund; (2) providing the Custodian with a summary of the
Individual's investments in the Fairmont Fund on a calendar year basis; (3)
making distribution from the Fairmont Fund as directed by the Custodian; and (4)
redeeming shares in the Fairmont Fund adequate to pay the Custodian its fees for
services performed under this Plan.
2. The Custodian shall make payments from the Individual's Account from
time to time in accordance with written instructions received from the
Individual or in the alternative, the Custodian shall direct the Transfer Agent
to make such distribution. The Custodian and the Transfer Agent shall be fully
protected in acting on written instructions of the Individual and shall not be
liable with respect to such payments.
3. The Custodian shall render a report to each Individual on the status
of his Account at least annually. The report shall show contributions received
from the Individual, the amount of distributions made to or withdrawals made by
the Individual, interest or dividend credits, other credits and/or charges, and
the balance at the end of the report period. The Individual shall advise the
Custodian within 90 days following receipt of the Custodian's report of any
corrections to his Account. If the Individual fails to advise the Custodian of
any corrections within the 90 day period, the Individual shall be deemed to have
approved the Custodian's report.
4. The Custodian shall prepare such reports as may be required by the
Internal Revenue Code or by any Governmental unit or agency having authority to
request reports. Individuals adopting this Master Plan hereby agree to furnish
the Custodian with such information as the Custodian may require to prepare such
reports.
5. The Custodian may enter into appropriate agreements with an
Individual's Employer in regard to a Simplified Pension Plan.
6. The Custodian may designate an agent to perform for it any and all
of its duties set forth hereunder but the Custodian shall continue to remain
responsible to the Individuals for the performance of such duties.
7
<PAGE> 8
ARTICLE VI
AMENDMENT AND TERMINATION
1. The Custodian may amend any or all provisions of this Master Plan at
any time without obtaining the approval or consent of the Individual who has
adopted this plan provided that no amendment shall authorize or permit any part
of the Individual's Account to be used for or diverted to purposes other than
for the exclusive benefit of the Individual and his beneficiary.
2. The Custodian intends that this plan will meet the requirements of
Section 408 of the Internal Revenue Code as a qualified master individual
retirement account plan. Should the Commissioner of Internal Revenue or any of
his delegates at any time determine that the plan fails to meet the requirements
of said Section 408, the Custodian will amend the plan so as to maintain its
qualified status.
3. The Custodian may resign by written notice to the Individual which
shall be effective sixty days after delivery. In the event of such resignation,
the Individual shall, prior to the effective date thereof, amend his Plan to
appoint a new Custodian or arrange for another funding agent. No further
contributions shall be accepted by the Custodian once its resignation becomes
effective. The Custodian shall transfer the balance held in the Individual's
Account to the Individual on the effective date of the resignation or as soon
thereafter as practical. Such transfer will be made only after the Custodian
receives from the Individual a statement signed by the Individual indicating
whether the amount distributed is to be a Rollover contribution within the
meaning of the Section 408 (d) (3) (B) of the Internal Revenue Code.
ARTICLE VII
MISCELLANEOUS PROVISIONS
1. The Custodian shall charge a fee for its services according to its
standard schedule of rates as in effect from time to time. The initial schedule
of such charges shall be attached to the IRA Adoption Agreement and the
Individual shall be notified in advance in writing of any changes in such fees.
Such fees shall be payable by a direct billing to the Individual, by a
redemption of shares in the Fairmont Fund by the Transfer Agent, or other
withdrawal of funds from the account. The source of payment shall be determined
solely by the Custodian. Any fee directly billed to an Individual shall be
payable within 30 days and if the Custodian's fee is not paid within such thirty
(30) day period, the Custodian shall deduct its fee from the Individual's
Account.
2. Words in the masculine gender shall be deemed to include the
feminine.
3. The Plan of each Individual who adopts this Master Plan shall be
administered separately from those of any other Individual.
4. The use of this Master Plan shall be available only to the plans of
Individuals which meet the requirements of the applicable provisions of the
Internal Revenue Code of 1954, as amended.
8
<PAGE> 9
LIBERTY - FAIRMONT ADOPTION AGREEMENT
The undersigned has opened an Individual Retirement Account (the
"Account") with Liberty National Bank and Trust Company of Louisville
("Liberty"), and the undersigned and Liberty mutually agree as follows:
1. The undersigned agrees to pay the fees for the Account as set out in the
Fairmont Liberty IRA Fee Schedule which is Exhibit A to this Adoption Agreement
and which is incorporated herein by reference. These fees will be subject to
change at any time upon 30 days written notice to the undersigned from Liberty.
2. Selection of Investment. At the time any contribution is made to the Account,
the undersigned shall indicate on the contribution election form which of the
investment methods described in paragraphs number 3-6 below shall govern the
contribution.
3. Savings Investment. Contributions made to this investment shall be at the
simple rate of interest indicated on the contribution election form, and
interest shall be compounded daily. Liberty reserves the right to require 14
days written notice prior to the withdrawal of any contribution made to this
investment.
4. Fixed Rate Investment. Contributions made to this investment shall have a
term and simple rate of interest as indicated on the contribution election form.
5. Variable Rate T-Bill Investment. This investment shall mature 18 months from
the date of the first contribution. Additional contributions may be made to this
investment without extending the maturity of all or any portion of the other
investments. The rate of interest paid on the contributions that have been made
to this investment shall vary from time to time but shall not be less than the
most recent average auction rate established on a discount basis for U. S.
Treasury bills with maturities of 26 weeks (Treasury Bills). This rate, which
shall apply to all contributions made under this investment, shall change each
week, and the new rate shall be effective on the date of issuance of new
Treasury Bills.
6. Fairmont Fund Investment. Contributions made to this investment will be
invested in the Fairmont Fund for which Morton H. Sachs and Company, or its
successors serves or may in the future serve as Investment Advisor. If this
investment is selected, the undersigned certifies that the undersigned has
received a copy of the Fairmont Fund's current Prospectus and that the
undersigned has full authority and legal capacity to make an investment in the
Fairmont Fund. The undersigned appoints Liberty as his agent to enter orders for
shares whether by direct purchase or exchange, to receive dividends and
distributions for automatic reinvestment in additional shares of the Fairmont
Fund and to surrender for redemption shares held in the undersigned's account in
accordance with the prospectus and all applicable law. NEITHER INVESTMENT
RESULTS NOR GROWTH IN THE VALUE OF YOUR INVESTMENT IN THE FAIRMONT FUND CAN BE
PROJECTED OR GUARANTEED. THE UNDERSIGNED MUST READ THE FAIRMONT FUND'S
PROSPECTUS FOR ANY INFORMATION ABOUT THE FAIRMONT FUND. The undersigned
acknowledges that Liberty has not rendered or undertaken to render investment
advice to the undersigned in regard to investment in the Fairmont Fund. All
dividends, gains or other distributions received in respect of the Fairmont Fund
will be reinvested in the Fairmont Fund unless otherwise directed by the
undersigned in writing.
7. Automatic Renewal. Upon the maturity of any contributions made into the Fixed
Rate Investment or upon the maturity of the Variable Rate T-Bill investment, the
maturing contributions or
<PAGE> 10
investment shall be considered to be renewed automatically for an additional
term equal in length to the original term, and thereafter for additional
successive terms equal in length to the original term, except that any
contributions made to either of the investments may be withdrawn within ten days
after the original or any subsequent maturity date. However, Liberty retains the
right to change the rate of interest paid on the investment; to impose new fees
on the investment, or to terminate the paying of interest thereon at the
original or any subsequent maturity date by giving ten days written notice, sent
by regular U. S. Mail to the address of the undersigned listed on this
Agreement. If the bank fails to notify the undersigned of a change or
termination of interest paid on the investment and if automatic renewal occurs,
the interest payable for each new term on the various contributions in the Fixed
Rate Investment shall be at a rate equal to the then prevailing rate of interest
paid by Liberty on deposits with Liberty of similar amount and maturity, and the
interest payable for each new term of the Variable Rate T-Bill Investment shall
be calculated in the same manner as described in paragraph number 5 above. The
undersigned may elect to have any contribution renewed for a different rate and
term, so long as the new rate and term are consistent with those being offered
by Liberty at the time of renewal for contributions of similar amounts. Such
election shall be made by giving Liberty written instruction within ten days
after the maturity date of the contribution.
8. Minimum Contribution Amounts. All contributions made to the Account shall be
subject to such minimum contribution size requirements as Liberty shall have in
effect at the time of the contribution.
9. Early Withdrawal Penalties. This rule shall only apply to contributions to
either the Fixed Rate Investment or the Variable Rate T-Bill Investment. The
undersigned has agreed to keep the funds contributed into the Account invested
until the date of their maturity. If contribution has a term of less than three
months and Liberty permits withdrawal before maturity, federal regulations
require the forfeiture of an amount withdrawn at the rate being paid on the
contribution had the funds remained invested until maturity. If a contribution
has a term of three months or more to one year and Liberty permits withdrawal
before maturity, federal regulations require the forfeiture of an amount equal
to three months of interest on the amount withdrawn. If a contribution has a
term of more than one year and Liberty permits withdrawal before maturity,
federal regulations require the forfeiture of an amount equal to six months of
interest on the amount withdrawn. Any amount forfeited will be calculated at the
rate being paid on the contribution on the date of withdrawal computed on a
simple interest basis.
10. Guarantee of Interest Rate. Liberty will guarantee the rates of interest
referred to in this Agreement in paragraphs 3, 4 and 5 and in the contribution
election slips evidencing contributions to the Account only until the first of
the following events occurs: (a) the maturity date of the contribution; (b) the
undersigned attains the age of 59 1/2 years; (c) the undersigned becomes
disabled within the meaning of Section 72 (m) (7) of the Internal Revenue Code;
or (d) the undersigned dies. LIBERTY DOES NOT GUARANTEE ANY RATE OF INTEREST OR
RETURN WITH RESPECT TO ANY CONTRIBUTION TO THE FAIRMONT FUND INVESTMENT.
11. Address. The signature and address appearing in this Agreement shall be
honored by Liberty in all transactions pertaining to the Account until written
notice of a change is received from the undersigned.
<PAGE> 11
12. Federal and State Regulations. The terms of this Agreement and all
subsequent transactions conducted under the provisions of this Agreement shall
be subject to the rules and regulations of the legally constituted regulatory
and supervisory authorities and shall be subject to change without notice where
required by state or federal law or regulation.
In order to open the Account, Customer supplies the following
information:
NAME:
ADDRESS:
EMPLOYER:
SOCIAL SECURITY NUMBER:
DATE OF BIRTH:
TELEPHONE NUMBER:
I hereby designate the following as my Beneficiary at my death under
the terms of the above Agreement.
BENEFICIARY:
ADDRESS:
SOCIAL SECURITY NUMBER:
RELATIONSHIP:
If the above individual is not surviving at my death, I designate the
following as my Beneficiary under the terms of the Agreement:
BENEFICIARY:
ADDRESS:
SOCIAL SECURITY NUMBER:
RELATIONSHIP:
This designation of Beneficiary supersedes and replaces all prior
designations.
<PAGE> 12
This IRA Adoption Agreement and The Liberty IRA Master Plan have been
sent to the Internal Revenue Service on January 8, 1982, with an application to
qualify them as a Prototype Individual Retirement Account under the Internal
Revenue Code.
By signing below the undersigned agrees to be bound by the above terms
and conditions and adopts the Liberty IRA Master Plan and acknowledges having
read and received the Liberty IRA Master Plan and Fact Book and Disclosure.
<PAGE> 13
Witness the signature of the undersigned and Liberty as of the date set
forth below.
SIGNATURE:
----------------------------------------------------------------
Date
LIBERTY NATIONAL BANK AND TRUST COMPANY
OF LOUISVILLE (Custodian)
BY:
-----------------------------------------------------------------------
Date
<PAGE> 14
EXHIBIT A
LIBERTY - FAIRMONT IRA FEE SCHEDULE
1. Account Set-Up Charge $35.00
2. Annual Maintenance Charge $10.00
3. Charge for Termination of Account $15.00
4. Charge for Written Communications $10.00
5. Charge for Processing Distributions $10.00
per year
<PAGE> 15
LIBERTY - FAIRMONT
IRA FACT BOOK AND DISCLOSURE
This pamphlet has been prepared by Liberty National Bank and Trust
Company of Louisville (referred to hereinafter as Liberty National Bank) in an
effort to explain all of the benefits and ramifications of the Liberty-Fairmont
IRA in understandable language. This pamphlet also discloses the
responsibilities of the individual and the Bank, and it provides a projection of
the growth of the value of the account, the amount of which is not guaranteed
beyond the provisions of Federal Reserve regulations. As provided in Internal
Revenue Code Section 408, by signing the IRA Adoption Agreement, the Depositor
acknowledges receipt of the Liberty-Fairmont IRA Fact Book and Disclosure on or
before the date the account was opened.
REVOCATIONS
Within seven (7) days of signing of the IRA Adoption Agreement you may
revoke your IRA for any reason and receive a full refund of your contributions
by notifying the following person in writing:
IRA Product Specialist
Liberty National Bank & Trust Company
P. O. Box 32500
Louisville, KY 40232
The last page of this booklet contains a form letter which you may use
in revoking your account.
In the alternative, you may hand deliver the notice to any Liberty
National Branch Bank and such delivery within the specified time period will be
adequate to revoke the account.
If you mail the notice it shall be deemed mailed on the date of the
postmark (or if sent by certified or registered mail, the date of certification
or registration) if it is deposited in the mail in the United States in an
envelope or appropriate wrapper, first class postage prepaid, properly
addressed.
I. Basic Information
The information contained in this pamphlet complies with Federal
disclosure regulations and should provide you with certain basic information
about the Liberty-Fairmont Individual Retirement Account (IRA) in hopefully
understandable language. However, if after reading this pamphlet you are
confused on some point you may call your branch bank or the IRA Products
Specialist at the main office for help. Because this pamphlet is only a summary
of the operation of the Liberty-Fairmont IRA, you may wish to contact the local
district office of the Internal Revenue Service or your own tax advisor as to
the establishment and operation of an IRA. GENERALLY, YOU SHOULD RECEIVE THIS
PAMPHLET AT LEAST SEVEN DAYS BEFORE YOU OPEN AN IRA. THIS SEVEN-DAY PERIOD IS TO
ALLOW YOU A SUFFICIENT PERIOD TO COMPLETELY INFORM YOURSELF ABOUT IRAs. HOWEVER,
IF YOU OPEN YOUR IRA WITHIN SEVEN DAYS OF RECEIPT OF THIS PAMPHLET, YOU MAY
REVOKE YOUR IRA AND RECEIVE A FULL REFUND OF
1
<PAGE> 16
YOUR DEPOSITS BY SIMPLY MAILING OR DELIVERING YOUR NOTICE OF
REVOCATION TO:
IRA Product Specialist
Liberty National Bank & Trust Company
P. O. Box 32500
Louisville, KY 40232
Your notice of revocation is attached to this Disclosure statement.
II. Basic Operation
The theory behind an IRA is simple, you may save an allowable portion
of your earnings each year by contributing it to an IRA. You get a deduction for
these contributions on your income taxes. The earnings from these contributions
will be free from taxes in the year it is earned. When you retire, you will
begin withdrawing from your IRA and your withdrawals will be taxable to you at
that time. However, in the meantime your contributions and earnings on your
contributions will have been free from tax. Also, upon your retirement you may
be in a lower tax bracket so that your withdrawals may be taxed at a lower rate.
III. Who May Save In An IRA
Provided you meet certain other requirements, you may open an IRA or
contribute to your existing IRA at any time until the year in which you reach
70-1/2. In the year you reach age 70-1/2 and thereafter, you may no longer open
or contribute to an IRA. In addition, your employer may contribute on your
behalf to your IRA and such contribution shall be subject to the special rules
set forth in Section XI at page 9. (Employer contributions to SEPPS may continue
after you reach age 70-1/2).
For tax years commencing on or after January 1, 1982, you may
contribute to an IRA even if you are covered by another qualified plan.
IV. When You May Open An IRA
You may open an IRA and be entitled to an allowable income tax
deduction for amounts contributed to the IRA at any time during your tax year or
before you have timely filed your tax return for the year. (This is generally
April 15 if you are a calendar year taxpayer but it may be later if you file an
extension for filing your tax return.) For example, if you wanted to open an IRA
for the calendar year 1982, you may open the IRA at any time after December 31,
1981, and before April 15, 1983 or later if you file an extension and receive an
income tax deduction for 1982.
V. Where And How To Open An IRA Account
You may open an IRA at the Fairmont Fund, 2705 Citizens Plaza,
Louisville, Kentucky 40202 or by mail. At such time you will need to fill out
various forms in opening an account.
The whole process only takes a few minutes.
2
<PAGE> 17
VI. Types of Accounts
Excluding Rollover IRA's and Employer Contribution IRA's which are
explained in Section X at page 8, and Section XI at page 9, there are two types
of IRA's, the Regular IRA and the Spousal IRA.
A. Regular IRA's
Provided you are eligible (see Section III at page 2), you may
open a regular IRA for yourself. For tax years commencing on or after January 1,
1982, you may contribute to a Regular IRA the lesser of $2,000.00 or one hundred
percent (100%) of your annual compensation. (The amount of this allowable
contribution will be reduced by the amount of deductible voluntary contributions
you make under other qualified plans of which you are a member.) Compensation
means wages, salary, professional fees, commissions, and other amounts earned
from personal services. It excludes interest, dividends, etc. You will receive
an income tax deduction for the permissible amount of your contributions. A
Regular IRA may be opened by each person regardless of his marital status.
Therefore, if a husband and wife each are eligible to open an IRA, each may
contribute up to the maximum allowable amount. For example, if a husband and
wife each earn $10,000.00 in 1982, they may open an IRA and deposit up to
$2,000.00 into his or her separate account for a combined contribution of
$4,000.00. However, if only one spouse has compensation of $20,000.00 in 1982,
the maximum amount that may be contributed into a Regular IRA for that spouse is
$2,000.00
B. Spousal IRA's
For tax years beginning on or after January 1, 1982, you may
open two Spousal IRAs, one for yourself and one for your spouse if you meet all
of the following requirements: (1) You are married at the end of your taxable
year; (2) You file a joint return for the year; and (3) Your spouse has not
received any compensation for the year. If you are eligible to open Spousal
Accounts you may make a combined contribution into these IRAs of the lesser of:
(1) $2,250.00 or (2) One hundred percent (100%) of your compensation for the
year. You may divide your contribution between the two accounts in any
proportion and still receive the full maximum deduction as long as the
contribution to neither Spousal IRA exceeds $2,000.00
For example, assume that you earn $20,000.00 in 1982, your
spouse does not work during the year and that you are eligible to open an IRA
for the year. If you open two Spousal IRAs, you may make a combined deposit into
the two accounts of up to $2,250.00 (This is because $2,250.00 is less than 100%
of your earnings ($20,000.00.) Although you may divide the $2,250.00 between the
two accounts in practically any proportion you desire, you must make sure that
neither account receives a contribution greater than $2,000.00.
For tax years commencing on or after January 1, 1982, under
certain conditions, a divorced spouse may continue to make contributions to the
Spousal IRA established for him or her. In order for a divorced spouse to
continue to make contributions to his or her Spousal IRA, he or she must meet
all of the following requirements: (1) A Spousal IRA was established for the
benefit of the divorced spouse at least 5 years prior to the beginning of the
calendar year in which the divorce decree or decree of separate maintenance was
issued by a court; and (2) deductible contributions were made in 3 out of the 5
most recent taxable years
3
<PAGE> 18
ending before the taxable year in which the decree was issued. An eligible
divorced spouse may make contributions to the Spousal IRA of the lesser of
$1,125.00 or 100% of his or her Compensation for the year including any taxable
alimony.
VII. Your Rights Under an IRA
Your IRA is established under the Liberty-Fairmont IRA Master Plan. On
January 8, 1982, Liberty requested Internal Revenue Service approval of the
Master Plan and approval has not yet been issued. Internal Revenue Service
approval will not mean that an IRA opened by an ineligible person will qualify
for favorable tax status nor will it represent an approval of the merits of a
Liberty-Fairmont IRA as an investment.
The Master Plan and other adoption documents provide as follows:
A. The Account
Liberty National Bank receives your money as a custodian. As a
custodian, it establishes an account in your name and if you have Spousal
accounts, it will establish a separate account in your name and a separate
account in your spouse's name. Each person has a nonforfeitable right to all
funds in his account. Your account may be invested in one or more of several
investments as you may designate. These investments include time deposit
accounts, money market accounts, and money market investments and similar
investments. (These available bank investments are referred to herein as time
deposit accounts.) Your account may also be invested in shares of the Fairmont
Fund. The terms of each of these investments is more fully described in the IRA
Adoption Agreement and the Prospectus for the Fairmont Fund that is included in
your informational packet. The range of the investments offered is to permit you
as much flexibility as possible in investing the money in your account. However,
Liberty does not represent or recommend any investment as being suitable for
you. You should bear in mind that regardless of the time deposit account you
select, you may not withdraw your money from any investment until it has matured
unless Liberty consents to the withdrawal. These restrictions will not be placed
on that portion of your Account that is invested in the Fairmont Fund. (However,
you should carefully review the Prospectus at the Fairmont Fund to understand
that investment.) (See also, Section VIII at page 5, which indicates that
federal law may subject you to various penalties and taxes on early withdrawal
even if Liberty National Bank allows a withdrawal during the maturity term of
your investment to the extent it is invested in time deposit accounts.) No
portion of your investment will be invested in life insurance.
B. Contributions
Each year you may voluntarily contribute the maximum amount
deductible from income taxes to your account. At the time you open your account
you may name a beneficiary or beneficiaries who will receive your account
balance upon your death.
Except in the case of a rollover or in the case of an
Employer's Contribution, for years commencing on or after January 1, 1982, no
contribution in excess of $2,000.00 will be accepted for any individual.
4
<PAGE> 19
C. Withdrawals
You must begin withdrawing from your IRA during the tax year
in which you reach age 70-1/2. These installments must be designated to pay out
your entire IRA over one of the following periods:
1. Your life;
2. The lives of you and your spouse;
3. A definite period of time not extending beyond your life
expectancy;
4. A definite period of time not extending beyond the combined
life expectancy of you and your spouse.
If you fail to elect one of the alternative methods before the
end of the year in which you reached 70-1/2, Liberty National Bank will
distribute a single sum to you. If you die before your entire interest is
distributed to you, or if distribution has been commenced to your surviving
spouse, (as provided in (b) or (d)) and your surviving spouse dies before the
entire interest is distributed to your spouse, the remaining undistributed
balance will be distributed either in a single sum or be applied to purchase an
immediate annuity for your beneficiary of your surviving spouse's beneficiary,
with 5 years after your death or the death of your surviving spouse. The terms
of this annuity will provide for payments over the life of the beneficiary, or
for a term certain not exceeding your beneficiary's life expectancy. Any annuity
contract so purchased will be distributed immediately to the beneficiary.
However, no such annuity contract will be required to be purchased if
distributions over a term certain began before your death and the term certain
is for a period permitted under (c) or (d).
As an alternative to distributing the amount of your IRA
directly to you, Liberty may direct the Transfer Agent of the Fairmont Fund to
make such payment to you directly.
D. Custodian Reports
At least annually, Liberty National Bank will supply with
summaries of your account activity. In addition, in the succeeding year Liberty
National Bank will take the following action in regard to your account activity
for the year just ended: (1) before January 31, Liberty National Bank will send
you a form 1099-R or form W-2P which will set forth your withdrawals for the
year; and (2) finally, by June 30, Liberty National Bank will send you a form as
to any account activity attributable to the preceding year. (See VIII-C at page
6).
E. Custodian's Responsibility
Liberty National Bank has a duty to provide you with the
necessary plan documents, disclosure statement, and reports described in this
document. Failure to provide such documents to you will result in a $10.00
penalty tax payable by Liberty National Bank for each failure to provide such
information unless such failure resulted for a reasonable cause.
Liberty National Bank shall charge the following fees for
services performed
5
<PAGE> 20
under the Plan: (1) An initial fee on opening the Account; (2) An annual service
fee; (3) A termination fee upon the termination of the Account through
withdrawal or otherwise; (4) A fee for each written communication on any
distribution; and (5) An annual fee for processing distributions. The amount of
the fees will be set forth in the IRA Adoption Agreement and may be changed from
time to time upon 30 days written notice by the Liberty National Bank.
The fees may be billed to you directly and will be payable
within 30 days or they may be withdrawn from your Account. Liberty shall
determine in its discretion whether to bill you directly or withdraw the amount
from your Account. Any amount billed to you directly and not paid within 30 days
will be deducted from your Account.
VIII. Restrictions On Your IRA
Federal law imposes certain penalties for certain actions you may take
in regard to your IRA.
A. Early Withdrawal
You may withdraw funds from your IRA without any penalties if
you become disabled or if you attain age 59-1/2. (See VII-E as to the
termination fees.) However, if you withdraw funds under other circumstances, the
withdrawal will normally be subject to a penalty tax equal to 10% of the
withdrawn amount. (See, VII-A at page 4 for restrictions of withdrawals during
the maturity term of a time deposit agreement account and penalty tax for
certain withdrawals of excess contribution. In addition, Federal banking laws
require that a substantial interest penalty apply if you make withdraws on the
portion of your investment invested in time deposit accounts before the maturity
date of such investments. The IRA Adoption Agreement describes these interest
penalties in detail.
Furthermore, if you enter into a prohibited transaction (See
VIII-D at page 7), the total balance in your account will be subject to the 10%
penalty tax unless at the time of the prohibited transaction you are either
disabled or you have attained age 59-1/2. For purposes of this pamphlet, you are
considered to be disabled when you are unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be a long-continued
and indefinite duration.
B. Failure to Make Proper Withdrawals
In the year in which you obtain age 70-1/2, you must begin to
make withdrawals from your IRA. You may withdraw any amount from your account,
including the full account balance. However, in order to avoid a penalty tax,
withdrawals must be made in the following manner:
(1) A lump-sum withdrawal of the full account balance; or
(2) Yearly withdrawals in substantially equal
installments.
If in any such year you fail to make such a withdrawal in
either the manner set
6
<PAGE> 21
forth in (a) or (b), a 50% penalty tax will apply to the difference between the
amount of your required withdrawal and the amount that you actually withdrew.
For example, if you should have withdrawn $1,000 per year and you only withdrew
$600.00, a penalty tax equal to $200.00 (50% of $400.00) will apply. The
Commissioner of the Internal Revenue Service may waive the penalty tax if you
can establish that the failure to withdraw the proper amount was due to a
reasonable error and you are taking reasonable steps to correct the situation.
C. Excess Contributions
A contribution in excess of the maximum amount deductible from
your income taxes each year shall be subject to an annual 6% penalty tax unless
it is corrected as set forth below. For example, if in 1982 you had a salary of
$1,200.00 and you contributed $1,500.00 to your Regular IRA, you would have made
an excess contribution of $300.00 (the maximum allowable deduction is $1,200.00)
(the less of $2,000.00 or 100% of your compensation), and this amount is subject
to a yearly 6% penalty tax for each year it is not corrected.
There are three ways to correct an excess contribution:
1. The easiest way to correct an excess contribution is to
withdraw the excess contribution from your account before you file your tax
return for the year in which you made the excess contribution. For example, if
in the above example you withdrew the $300.00 before you filed your tax return
in 1982, (generally on April 15, 1983), then you may withdraw the excess
contribution without any penalty taxes for excess contribution or for early
withdrawal. However, such early withdrawal may result in loss of interest
penalty for the portion of your IRA invested in time deposit accounts unless you
are disabled or at least 59-1/2 at the time of the withdrawal.
2. If you fail to withdraw an excess contribution before you
file your tax return for the year, you may correct the excess contribution in
the next year or any following year. For example, assume you made an excess
contribution of $300.00 for 1982. Further, assume you earned $8,000.00 in 1983,
which would allow you to contribute $2,000.00 for 1983 to your IRA. You may
correct the excess contribution for 1982 by contributing only $1,700.00 in 1983.
(The $2,000.00 allowable contribution less the $300.00 excess contribution for
1982.) Further, if you had not previously deducted the $300.00 excess
contribution for 1982, you may deduct that amount in 1983 along with the
$1,700.00 actually contributed in 1983. However, by failing to correct the
excess contribution before the filing of your 1982 tax returns, you will incur a
penalty tax of $18.00 for 1982 (6% of $300.00).
3. If you fail to correct the excess transaction by either of
the other ways, you may correct it after the filing of the 1982 return by a
withdrawal in 1983 or thereafter. For example, in 1983 you may simply withdraw
the excess $300.00. However, you will be responsible for the $18.00 penalty tax
for 1982. Further, you will be responsible for an additional early withdrawal
tax of 10% of the amount of the withdrawal unless: (1) you are 59 1/2 or
disabled at the time of the withdrawal; (2) a deduction was not allowed for the
excess contribution, or (3) the contribution did not exceed $2,250.00. (The
$2,250.00 limitation does not apply to a rollover contribution to the extent the
excess contribution resulted from erroneous information on which you reasonable
relied.) In addition, there will be a loss of interest penalty as a result of
the early withdrawal for the portion of your account invested in time deposit
accounts.
7
<PAGE> 22
D. Prohibited Transactions
Although your IRA is free from current tax on its earnings, it
will lose its tax exempt status if you engaged in a prohibited transaction as
defined under Section 4975(c) of the Internal Revenue Code or if you use your
IRA as security for a loan. A prohibited transaction will be considered a
withdrawal of the whole IRA and will result in the full balance in your account
being taxable to you at that time. If you use this account as security for a
loan, then the portion of the account so used will be treated as distributed and
must be included in your gross income for the year in which you so use the
account. If you are under 59-1/2 or if you are not disabled at the time of the
prohibited transaction, the 10% penalty tax on early withdrawal will also apply
to you.
IX. Taxation
A. As mentioned in Section VI, you will receive a deduction from your
income tax for your permissible contributions into your IRA. You are not
required to file a special IRA return if (1) no special penalty tax, discussed
in this disclosure statement, is imposed; or (2) there was no activity in your
IRA other than making regular annual contributions or distributions. However,
for other years you must file form 5329, along with your regular income tax
return, 1040. A failure to file form 5329 along with your 1040 without
reasonable cause will result in a $10.00 penalty for each day it is late. This
penalty may not exceed $5,000.00. The information on form 5329 may be filled out
from the reports supplied you by Liberty National Bank. The full deduction is
allowable regardless of your marital status.
B. All withdrawals from your IRA are fully taxable at ordinary income
rates. Although you may use the regular income averaging provision in computing
your tax on these withdrawals, the withdrawal will not be taxable at capital
gains rates nor may you use the special 10-year averaging rule that may be used
in computing taxes on certain distributions from qualified pension plans, etc.
The withdrawals will qualify for the retirement income credit.
C. If your IRA is transferred to your former spouse incident to a
divorce, you will not be taxed on the transfer and your former spouse will be
taxable on withdrawals from obligations, etc., in regard to the IRA.
D. When you die your IRA will be subject to estate tax if the balance
in your IRA is withdrawn in a manner other than in substantially equal
installments spread over at least 36 months. If at the time of your death your
IRA contains excess contributions, that portion of your account will be subject
to estate tax regardless of the method of withdrawal. You will incur no gift tax
upon naming any person as the beneficiary of your IRA.
X. Rollovers
A rollover is the tax-free transfer of funds to or from an IRA. Subject
to certain basic requirements set forth below, funds may be transferred tax-free
in the following situations: (1) From a qualified plan or tax sheltered annuity
to an IRA; (2) From an IRA to a qualified plan; and (3) From an IRA to another
IRA.
A. Who May Roll Over Funds
8
<PAGE> 23
A rollover may be made regardless of whether you are an active
participant in a qualified plan in the year of the rollover. A surviving spouse
of a participant in a qualified plan may rollover part or all of a qualified
lump sum distribution received by the spouse after the death of the participant.
(Such amount may not be later rolled over to a qualified plan in which the
surviving spouse is a participant.) However, generally a rollover from a
qualified plan may not be made in the year in which you attain age 70-1/2 or
thereafter; however, recently the Internal Revenue Service has permitted such
rollovers in special cases.
B. When May You Rollover Funds
Amounts you received from qualified plans or other IRA's must
be placed into an IRA within 60 days of their receipt by you in order to qualify
as tax-free rollovers.
Rollovers between IRA's may occur only once every year.
C. Where And How May You Roll Over Funds
Amounts may be rolled over by the same process as opening an
IRA. See Section V at page 2.
D. Type of Account
Rollovers must be transferred into a separate IRA account.
Also, you must not make contributions to an IRA containing rollover funds. This
is because commingling regular IRA contributions with rollover funds restricts
your ability to rollover such funds to qualified plans later.
E. Rights And Restrictions
Generally, your rights under a rollover IRA and a Regular IRA
are the same. Likewise, the restrictions on such IRA's are generally the same.
However, there are the following differences:
(1) You may rollover any amount without regard to the
limitations on the amount of annual contributions that may be made to Regular
and Spousal IRA's.
(2) Rollovers from qualified plans are generally tax-free if
the full balance of your benefits under such plan is distributed to you in one
taxable year in a lump sum distribution or if the full balance of your benefits
is distributed to you within one taxable year as a result of the termination of
the plan. Lump sum distributions generally result from a distribution because of
death, disability, separation from employment or the attainment of age 59-1/2.
Any portion of a lump sum distribution may be rolled over into an IRA; however,
there are certain limitations as to rolling over your own contributions to a
qualified plan into an IRA. Employee contributions may be rolled over into an
IRA if they were deductible employee contributions when made to the qualified
plan. (Deductible employee contributions are contributions made by an employee
himself to a qualified plan for which an income tax deduction is allowed to the
employee.)
(3) If property, other than cash, is distributed from a
qualified plan to you, it may be sold by you and the proceeds or any portion
thereof may be rolled over into an IRA.
9
<PAGE> 24
Liberty National Bank will not receive rollovers of property other than cash.
(4) If your IRA received a rollover from a Keogh Plan under
which you were a self-employed person, such an amount may not be transferred in
a rollover to a qualified plan.
(5) Transfers from an IRA to a qualified endowment contract
will be treated as a rollover contribution. However, the amount of the assets
that are used to purchase life insurance protection are considered to be amounts
distributed to you, and you must include this amount in your gross income for
that taxable year.
F. Taxation
Amounts transferred to an IRA in a rollover are not taxable on
the transfer and you get no deduction on their transfer. The rules of taxation
otherwise applying to IRA's apply to rollover IRA's.
XI. Employer Contributions (SEPP's)
A. General
You and your employer will be entitled to an increased
deductions for employer contribution to your IRA account if your employer adopts
a simplified pension plan. For years commencing on or after January 1, 1982, the
maximum deduction is the lesser of 15% of your includible compensation
(determined without regard to employer contributions to your IRA) or $15,000.00.
You may contribute and deduct your own contributions up to the maximum allowable
amount ($2,000 or 100% of compensation) regardless of the amount that your
employer contributes under the SEPP. If you are a shareholder, an officer, or an
owner- employee with your employer, the amount of the maximum deductible
contribution will be reduced by any self-employment or employer paid FICA tax
that is taken into account in determining the amount of employer contributions.
B. Special Requirements and Limitations
Before you are eligible to receive the increased employer
contributions, your employer must establish and comply with the following
special rules for simplified pension plans:
1. The employer must make a contribution to the IRA account
of each employee who has attained age 25 and has performed services for the
employer in at least three of the preceding five calendar years. However, the
employer may exclude employees covered by a collective bargaining plan where
there is evidence of good faith bargaining over retirement benefits and further
may exclude nonresident alien employees.
2. An employee's rights to his account must be
nonforfeitable, subject to his withdrawal at any time, and future employer
contributions may not be conditioned upon retention in this IRA of employer
contributions.
3. Contributions under the plan may not discriminate in
favor of any officer,
10
<PAGE> 25
shareholder, highly compensated employee or self-employed individual. However,
the contributions may bear a uniform relationship to total compensation. If
contributions do bear a uniform relationship to compensation then compensation
up to $200,000.00 may be taken into account, but if compensation over
$100,000.00 is considered in making contributions, contributions for all
employees must be not less than 7.5% of compensation.
4. Contributions must be made under a definite written
allocation formula which both specifies the requirements than an employee must
satisfy to share in the allocation and the manner in which the amount is
allocated.
5. The employer shall provide such reports as required by
the Internal Revenue Service.
6. If you are over age 70-1/2 your employer may still make
contributions on your behalf; however, because in an IRA you must begin
withdrawing your account at age 70-1/2, these additional contributions must be
considered in determining the correct amount to be withdrawn.
7. If you are employed by a Subchapter S Corporation and you
are a shareholder-employee, the amount that your employer may contribute to a
defined contribution plan on your behalf must be reduced by the amount your
employer deducts for contributions under a Simplified Pension Plan on your
behalf. Furthermore, if your employer maintains a defined benefit HR-10 plan,
covering self-employed persons, or if your employer is a Subchapter S
Corporation and it maintains a defined benefit plan, covering shareholder
employees, it may not contribute to a Simplified Pension Plan.
8. Your employer may integrate his contributions on your
behalf under a Simplified Pension Plan with Social Security and thereby reduce
his required contributions under the Plan. However, your employer may not do so
if he already maintains another integrated plan or if the Government Plan
5305-SEP is used to establish the plan.
9. Your employer's contributions are exempt from FICA and
FUTA taxes if it is reasonable to believe that you can deduct these employer
contributions.
10. In applying the exceptions allowing for an avoidance of
the 10% premature withdrawal penalty tax after the filing of your return,
normally the penalty will not apply if total contributions have not exceeded
$2,250. When applying this exception in regard to Simplified Pension Plans, the
premature penalty tax does not apply where the total contribution does not
exceed the lesser of the employer's contribution and $15,000.00.
XII. Growth Of Your IRA
The following tables are designed to show you a projected growth in a
Regular IRA and in a Rollover IRA. Table I and II assume a rate of interest of
12% on your investment. This rate is not generally guaranteed but is a rate
assumed only for purposes of making the projection contained in the tables.
Deposits may earn interest at different rates, depending on business and
economic conditions together with subsequent legal changes on permissible rates
of interest. THE TABLES ARE DESIGNED ONLY TO SHOW PROJECTED GROWTH FOR THAT
PORTION OF YOUR IRA INVESTED IN TIME DEPOSIT ACCOUNTS. IT
11
<PAGE> 26
MUST BE UNDERSTOOD THAT ANY PORTION OF YOUR IRA INVESTED IN THE FAIRMONT FUND
MAY NOT RETURN EARNINGS OR APPRECIATION. YOU SHOULD NOT ASSUME OTHERWISE FROM
THESE TABLES. PLEASE REFER TO THE FAIRMONT FUND PROSPECTUS TO FULLY ASSESS SUCH
INVESTMENTS. In any event, when you attain age 59-1/2 or become disabled or die,
Liberty National Bank waives any applicable maturity term on deposits invested
in time deposit accounts and from that time on there is not guaranteed rate of
interest on the portion of your account invested in time deposit accounts and
the entire portion is subject to a rate change. Therefore, the tables are only a
projection of your account balance. There is no charge for opening or
contributing to an IRA and the tables reflect no charge.
Table I is an estimation of the growth of a Liberty National Bank IRA
for 1 through 50 years. It is computed on the basis of $1,000.00 being deposited
into your account every January 1 for 50 years. Using this table, you can find
the estimated balance available for withdrawal each year for the first five
years the account is open and for the years you attain the ages of 60, 65, and
70. Simply subtract your current age from 60, 65, and 70 and locate the three
resulting differences on the chart under the YEAR column.
Columns A & B show the current balance on December 31st of each year,
if you were to close the account on December 31st and if you were 59-1/2 years
of age or older, disabled, or deceased, then the figures appearing in the
Columns A & B headed "12%" represent the balances owing for each year. These
columns also represent the current balance on December 31st of each year for
every individual regardless of age, assuming no withdrawal is made.
If an individual, prior to age 59-1/2, disability, or death, closes the
account, a substantial interest penalty on early withdrawals may apply. The IRA
Adoption Agreement describes the interest penalty in detail. The amount of
interest forfeited, if any, will reduce the amount available for distribution at
the end of every year.
Table II is based on the assumption that $1,000.00 is transferred to an
IRA in a rollover on a January 1 and that no other contributions have been made
to the IRA. The table reflects the account balance that will be available for
withdrawal on each December 31 thereafter. The other assumptions of Table I are
applicable and Table II operates the same as Table I in determining the amount
available for withdrawal at ages 60, 65 and 70.
12
<PAGE> 27
TABLE I - REGULAR IRA
<TABLE>
<CAPTION>
A B
YEAR 12% 12%
<C> <C> <C> <C>
1 $ 2,240 21 $ 183,055
2 4,749 22 207,206
3 7,559 23 234,310
4 10,706 24 264,668
5 14,230 25 298,668
6 18,178 26 336,748
7 22,599 27 379,398
8 27,551 28 427,166
9 33,097 29 480,665
10 39,309 30 540,585
11 46,266 31 607,695
12 54,058 32 682,859
13 62,785 33 767,042
14 72,559 34 861,327
15 83,507 35 966,926
16 95,767 36 1,085,197
17 109,499 37 1,217,661
18 124,879 38 1,366,020
19 142,105 39 1,532,183
20 161,397 40 1,718,285
</TABLE>
ANNUAL CONTRIBUTION:Two thousand dollars ($2,000.00) on January 1st
each year.
RATES: 12% Compounded annually
BASIS: 365 Days
COLUMNS A & B: Balance available for withdrawal for persons 59-1/2 years of
age or older. Also, current balance assuming no withdrawal
regardless of age of individual.
13
<PAGE> 28
TABLE II - ROLLOVER IRA
<TABLE>
<CAPTION>
A B
YEAR 12% YEAR 12%
<C> <C> <C> <C>
1 $1,120.00 21 $10,803.87
2 1,254.40 22 12,100.33
3 1,404.93 23 13,552.37
4 1,573.52 24 15,178.65
5 1,762.34 25 17,000.09
6 1,973.82 26 19,040.10
7 2,210.68 27 21,324.91
8 2,475.96 28 23,883.90
9 2,773.08 29 26,749.97
10 3,105.85 30 29,959.97
11 3,478.55 31 33,555.17
12 3,895.98 32 37,581.79
13 4,363.50 33 42,091.60
14 4,887.12 34 47,142.59
15 5,473.57 35 52,799.70
16 6,130.40 36 59,135.66
17 6,866.05 37 66,231.94
18 7,689.98 38 74,179.77
19 8,612.78 39 83,081.34
20 9,646.31 40 93,051.10
</TABLE>
CONTRIBUTION: One thousand dollars ($1,000.00) on January 1st
RATES: 12% Compounded annually
BASIS: 365 Days
COLUMNS A & B: Balance available for withdrawal for person 59-1/2 years of age
or older. Also, current balance assuming no withdrawal
regardless of age of individual.
14
<PAGE> 29
NOTICE OF REVOCATION
Liberty National Bank and Trust Company
IRA/KEOGH Department
Box 32500
Louisville, KY 40232
Dear Sirs:
This is to inform you that I opened my IRA on . I understand that I may revoke
my IRA and receive a full refund of my contributions by filing this Notice of
Revocation with you within seven days of signing the Time Deposit Account
Agreement. This letter should serve as notice of that revocation. Very truly
yours,
Name
Address
Account Number
Date
15
<PAGE> 1
Exhibit B16
FUND PERFORMANCE CALCULATION
1) The first step is to calculate what the terminal value of the investment is
at the end of the period under consideration, i.e. what a hypothetical $1,000
invested at the beginning of the period would be worth at the end of the period.
Any dividends or distributions during the period are considered to be
reinvested.
a. Divide the initial $1,000 investment by the beginning share price to
determine the number of shares acquired. (Note: since this is a no-load fund
without sales, redemption, or reinvestment fees, all of the $1,000 can be used
to by shares).
b. If a dividend or distribution occurs during the period, the dollar
amount will be reinvested in new shares:
i. Multiply the number of shares held at the time of the
distribution by the amount (per share) of the
distribution. This equals the dollar amount to be
reinvested.
ii. Divide this amount by the share price at which these
dollars can be reinvested to arrive at the number of
additional shares acquired.
iii. Add these shares to the original number of shares.
iv. Repeat these steps if there are other distributions
during the period.
c. At the end of the period, multiply the number of shares held by the
share price at that time to get the terminal or ending value.
2) The total return or performance (as a percentage) for that period will then
equal:
[(End. value - Beg. value)/Beg. value] = 100
3) The performance for several periods may be combined using the "chainlinking"
method, wherein the returns for each period are converted to "wealth relatives"
(i.e. decimal form + 1)
then multiplied together. For example:
a. Assume monthly return of: 3.06%, - 1.95%, and 5.01%
b. Convert to wealth relatives:
3.06% becomes 1.0306
-1.95% becomes .9805
5.01% becomes 1.0501
c. Multiply: 1.0306 x .9805 x 1.0501 = 1.0611
d. Convert from "wealth relative" back to decimal form by
subtracting 1: 1.0611 - 1= .0611 = 6.11% for the three
periods combined
16
<PAGE> 2
4) To annualize or find the average annual total return for a given period:
a. Convert the number to a "wealth relative" as above (e.g. 36.45%
becomes 1.3645)
b. Find the "nth" root of that number, where "n" = number of years over
which that return has been achieved, and then convert back to a percentage.
Example: 36.45% over 2 years = the 2nd or square root of 1.3645 = 1.1681 =
16.81% per year. Similarly, 18.32% over 18 months = the 1.5th root of
1.1832 = 1.1187 = 11.87% per year.
c. This process is the same as solving for "T" in the following
formula:
P(1 + T)n = ERY, where
P = a hypothetical initial payment of $1,000 T = average
annual total return n = number of years ERY = ending
redeemable value of that hypothetical $1,000 at the end of the
period under consideration
EXAMPLES OF ACTUAL FAIRMONT FUND CALCULATIONS
1) One Year Total Return:
Note 1: The greater precision used in calculating the numbers
found in the prospectus may cause what appear to be rounding errors in the
following illustrations.
Note 2: The same method of determining total return described
above and illustrated here may be applied to a time period of any length. The
Fund customarily makes the calculation on a monthly basis so that quarterly, one
year, five year, and since inception rates of return may be easily found by
"chainlinking" the appropriate monthly values.
Year: 1981 (9/2/81 - 12/31/81):
Beg. Price: $25.00
End. Price: $26.21
Distribution # Date Amount Reinv. Price
none paid
$1000/$25.00=40 shrs
* $26.21 End. Price
1048.40 End. Value
[(1048.40-1000)/1000) * 100 = 4.8% total return for partial
year
Year: 1982 (12/31/81 - 12/31/82):
Beg. Price: $26.21
End. Price: $33.06
Distribution # Date Amount Reinv. Price
17
<PAGE> 3
1 2/21/82 0.4728 24.98
2 2/25/82 0.0816 24.84
3 10/15/82 1.2500 30.57
$1000/$26.21 = 38.1534 shrs
* $0.4728 Dist #1
$18.0389/$24.98= 0.7221 shrs
38.1534 shrs
38.8755 shrs
* $0.0816 Dist #2
$3.1722/$24.84 = 0.1277 shrs
38.8755 shrs
39.0032 shrs
* $1.2500
$48.7540/$30.57 = 1.5948 shrs
39.0032 shrs
40.5980 shrs
* $33.06 end.
price
$1342.17 end.
value
[(1342.17-1000)/1000] * 100 = 34.2% one year total return
Year: 1983 (12/31/82 - 12/31/83):
Beg. Price: $33.06
End. Price: $42.22
Distribution # Date Amount Reinv. Price
1 4/8/83 2.2263 35.58
$1000/$33.06= 30.2480 shrs
* $2.2263 Dist #1
$67.3412/$35.58 = 1.8927 shrs
30.2480 shrs
32.1407 shrs
* $42.22 end. price
$1356.98 end. value
[(1356.98-1000)/1000] * 100 = 35.6% one year total return
Year: 1984 (12/31/83 - 12/31/84):
Beg. Price: $42.22
End. Price: $44.28
Distribution # Date Amount Reinv. Price
18
<PAGE> 4
1 2/29/83 2.2154 39.56
$1000/$42.22 = 23.6855 shrs
* $2.2154 Dist #1
$52.4728/$39.56 = 1.3264 shrs
23.6855 shrs
25.0119 shrs
* $44.28 end. price
$1107.53 end. value
[(1107.53-1000)/1000] * 100 = 10.7% one year total return
Year: 1985 (12/31/84 - 12/31/85):
Beg. Price: $44.28
End. Price: $54.23
Distribution # Date Amount Reinv. Price
1 2/28/85 3.2890 45.06
2 8/31/85 0.2625 48.47
$1000/$44.28 = 22.5836 shrs
* $3.2890 Dist #1
$74.2773/$45.06 = 1.6484 shrs
22.5836 shrs
24.2320 shrs
* $0.2625 Dist #2
$6.3609/$48.47= 0.1312 shrs
24.2320 shrs
24.3632 shrs
* $54.23 end. price
$1321.22 end. value
[(1321.22-1000)/1000] * 100 = 32.1% one year total return
Year: 1986 (12/31/85 - 12/31/86):
Beg. Price: $54.23
End. Price: $49.50
Distribution # Date Amount Reinv. Price
1 2/28/86 6.2809 53.64
2 12/31/86 5.8622 49.50
$1000/$54.23 = 18.4400 shrs
* $6.2809 Dist #1
$115.8197/$53.64 = 2.1592 shrs
18.4400 shrs
20.5992 shrs
* $5.8622 Dist #2
$120.7566/$49.50 = 2.4395 shrs
19
<PAGE> 5
20.5992 shrs
23.0387 shrs
* $49.50 end. price
$1140.42 end. value
[(1140.42-1000)/1000] * 100 = 14.0% one year total return
Year: 1987 (12/31/86 - 12/31/87):
Beg. Price: $49.50
End. Price: $44.87
Distribution # Date Amount Reinv. Price
1 12/31/87 0.7824 44.87
$1000/$49.50 = 20.2020 shrs
* $0.7824 Dist #1
$15.8061/$44.87 = 0.3523 shrs
20.2020 shrs
20.5543 shrs
* $44.87 end. price
$922.27 end. value
[(922.27-1000/1000] * 100= -7.7% one year total return
2) Cumulative Total Return:
This is calculated by "chainlinking" the one year (or one
month) return for as many periods as needed. The example below illustrates how
to "chainlink" one year returns in order to calculate a cumulative total return
since The Fund's initial public offering of shares.
(Note: The greater precision used in calculating the numbers
found in the prospectus may cause what appear to be rounding errors in the
following illustrations).
One Year Wealth
Year Return Relative Product Cumulative Return
1981 4.48% 1.0484 1.0484 (1.0484-1)*100=
4.48%
20
<PAGE> 6
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C>
1982 34.23% 1.3423 1.0484*1.3423=1.4072 (1.4072-1)*100=
40.72%
1983 35.68% 1.3568 1.4072*1.3568=1.9093 (1.9093-1)*100=
90.93%
1984 10.76% 1.1076 1.9093*1.1076=2.1148 (2.1148-
1)*100=111.48%
1985 32.12% 1.3212 2.1148*1.3212=2.7940 (2.7940-
1)*100=179.40%
1986 14.05% 1.1405 2.7940*1.1405=3.1865 (3.1865-
1)*100=218.65%
1987 -7.77% 0.9223 3.1865*0.9223=2.9388 (2.9388-
1)*100=193.88%
</TABLE>
3) Average Annual Total Return:
Average annual total returns are calculated by annualizing the
cumulative total return for the period under consideration (as described above).
One Year Period: The number is obviously already annualized.
It equals the cumulative total return for any 12 consecutive months. For a
calendar year, it will equal one of the one year returns shown above.
Five Year Period: Here, a cumulative total return is found for
the five years of interest (normally the most recent five). That number is
converted to a wealth relative, the fifth root taken, then converted back to a
percentage. For example, for 1983 - 1987:
Cum. Total Return = 1.3568 * 1.1076 * 1.3212 * 1.1405 * 0.9223 = 2.0884 or
108.84%
Avg. Ann'l. Total Return: The 5th root of 2.0884 = 1.1587, so
1.1587 - 1 = 0.1587 = 15.87%
Period Since Inception: Done in same manner as five year rate, except that "n" =
the number of years since The Fund's inception. From 9/2/81 to 12/31/87 =6.33
years.
Cum. Total Return = 1.0484 * 1.3423 * 1.3568 * 1.1076 * 1.3212 * 1.1405 * 0.9223
= 2.9388 or 193.88%.
Avg. Ann'l. Total Return: The 6.33th root of 2.9388 = 1.1856, so 1.1856 - 1 =
0.1856 = 18.56%
EXAMPLES OF ACTUAL WARRIOR FUND CALCULATIONS
1) One Year Total Return:
Note 1: The greater precision used in calculating the numbers
found in the prospectus may cause what appear to be rounding errors in the
following illustrations.
Note 2: The same method of determining total return described
above and illustrated here may be applied to a time period of any length. The
Fund customarily makes
21
<PAGE> 7
the calculation on a monthly basis so that quarterly, one year, five year, and
since inception rates of return may be easily found by "chainlinking" the
appropriate monthly values.
Year: 1987 (3/1/87 - 12/31/87):
Beg. Price: $25.00
End. Price: $21.92
Distribution # Date Amount Reinv. Price
1 12/31/87 0.2659 21.92
$1000/$25.00 = 40.0000 shrs
* $0.2659 Dist #1
$10.6360/$21.92 = 0.4852 shrs
40.0000 shrs
40.4852 shrs
* $21.92 end. price
$887.44 end. value
[(887.44-1000)/1000] * 100 = -11.25% one year total return
2) Cumulative Total Return:
This is calculated by "chainlinking" the one year (or one
month) returns for as many periods as needed. Given The Fund's relatively short
history, there is no need to accumulate multiple
<PAGE> 8
annual rates of return. However, to illustrate how "chainlinking" produces a
cumulative total return, 1987 monthly returns will be used to generate the
annual return shown above:
<TABLE>
<CAPTION>
Monthly Wealth
Month Return Relative Product Cumulative Return
- ----- ------- -------- ------- -----------------
<S> <C> <C> <C> <C>
Mar 0.00% 1.0000 1.0000 (1.0000-1)*100= 0.00%
Apr -4.40% 0.9560 1.0000*0.9560=0.9560 (0.9560-1)*100= -4.40%
May -1.84% 0.9816 0.9560*0.9816=0.9384 (0.9384-1)*100= -6.16%
Jun 4.18% 1.0418 0.9384*1.0418=0.9776 (0.9776-1)*100= -2.24%
Jul 3.11% 1.0311 0.9776*1.0311=1.0080 (1.0080-1)*100= 0.80%
Aug 7.58% 1.0758 1.0080*1.0758=1.0844 (1.0844-1)*100= 8.44%
Sep -0.33% 0.9967 1.0844*0.9967=1.0809 (1.0809-1)*100= 8.08%
Oct -20.50% 0.7950 1.0809*0.7950=0.8593 (0.8593-1)*100=-14.08%
Nov -7.08% 0.9292 0.8593*0.9292=0.7985 (0.7985-1)*100=-20.16%
Dec 11.15% 1.1115 0.7985*1.1115=0.8875 (0.8875-1)*100=-11.25%
</TABLE>
3) Average Annual Total Return:
Average annual total returns are calculated by annualizing the
cumulative total return for the period under consideration (as described above).
As of 12/31/87, The Warrior Fund had been in existence for 10
months. Since the cumulative total return for that period = -11.25% and "n" =
10/12 or 0.8333, the average annual total return for the period equals:
Cum. Total Return = -11.25%
Wealth Relative = -11.25/100 + 1 = 0.8875
Avg. Ann'l. Total Return: The 0.8333th root of
0.8875 = 0.8666, so
0.8666 - 1 = -0.1334 = -13.34%
