<PAGE>
As filed with the Securities and Exchange Commission on November 2, 1998
FILE NO. 2-12893
811-00749
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
POST EFFECTIVE AMENDMENT NO. 61
And
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 61
- -------------------------------------------------------------------------------
STONEBRIDGE FUNDS TRUST
(which by this Amendment is adopting and succeeding to the Registration
Statement under the Investment Company Act of 1940 of Stonebridge Aggressive
Growth Fund, Inc. (file no. 811-00749), and adopting and succeeding to the
Registration Statement under the Securities Act of 1933 of Stonebridge Growth
Fund, Inc. (file no. 2-15893) and Stonebridge Aggressive Growth Fund, Inc.
(file no. 2-12893) for all purposes, including for purposes of calculating
registration fees pursuant to Rule 24f-2 under the Investment Company Act of
1940)
(Exact name of registrant as specified in its charter)
370 17th Street, Suite 3100
Denver, Colorado 80202
(800) 639-3935
(Address of principal executive offices)
James V. Hyatt, Secretary
Stonebridge Funds Trust
370 17th Street, Suite 3100
Denver, Colorado 80202
(Name and address of agent for service)
- -------------------------------------------------------------------------------
Copy to:
Michael Glazer, Esq.
Paul, Hastings, Janofsky & Walker, LLP
555 S. Flower St.
Los Angeles, California 90071
- -------------------------------------------------------------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a) (ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485
IF APPROPRIATE; CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of securities being registered: Shares of Beneficial Interest,
$1.00 par value.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STONEBRIDGE FUNDS TRUST
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS AND IN STATEMENT OF
ADDITIONAL INFORMATION REQUIRED BY ITEMS OF FORM N-1A
FORM N-1A
ITEM AND HEADING PROSPECTUS CAPTION
- -------------------------------------------------------------------------
<S> <C>
PART A --
Item:
1. Cover Page Cover Page
2. Synopsis Annual Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant What are the Funds?; Objectives and Investment Policies
5. Management of the Fund Management of the Funds - Board of Trustees; Investment
Adviser;
Administrator; The Distributor; The Custodian; The
Transfer Agent
6. Capital Stock and Other Securities Distributions and Taxes
7. Purchases of Securities Being Offered Cover Page; How to Invest
8. Redemption or Repurchase How to Redeem Fund Shares; General Account Policies
9. Pending Legal Proceedings Inapplicable
PART B -- STATEMENT OF ADDITIONAL INFORMATION CAPTION
Item:
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Inapplicable
13. Investment Objectives and Policies Investment Objectives and Policies; Brokerage
Transactions
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Holders of
Securities Management of the Trust
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Policies Brokerage Transactions
18. Capital Stock and Other Securities Inapplicable
19. Purchases, Redemption and Pricing of
Securities Being Offered Pricing
20. Tax Status Taxation
21. Underwriters Inapplicable
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
PART C --
Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this
Registration Statement.
</TABLE>
<PAGE>
STONEBRIDGE FUNDS
OFFICERS AND DIRECTORS
Richard C. Barrett, CHAIHRMAN, BOARD OF TRUSTEES AND PRESIDENT
Dr. John G. Ayer, TRUSTEE
Debra L. Newman, VICE PRESIDENT, TREASURER AND TRUSTEE
Charles E. Woodhouse , VICE PRESIDENT AND TRUSTEE
Craig B. Burger, VICE PRESIDENT AND TRUSTEE
Selvyn B. Bleifer, M.D., TRUSTEE
Marvin Freedman, TRUSTEE
Charles F. Haas, TRUSTEE
William H. Taylor, II, TRUSTEE
Chad S. Christensen, VICE PRESIDENT
James V. Hyatt, SECRETARY
INVESTMENT ADVISER
Stonebridge Capital Management, Incorporated
1801 Century Park East, Suite 1800
Los Angeles, California 90067-2320
ADMINISTRATOR
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, Colorado 80202-5631
TRANSFER AGENT
National Financial Data Services
330 West 9th Street
Kansas City, Missouri 64105
CUSTODIAN
Fifth Third Bank
Fifth Third Center
38 Fountain Square Plaza
Cincinnati, Ohio 45263-0001
AUDITORS
Hein + Associates LLP
717 17th Street, Suite 1600
Denver, Colorado 80202-3338
STONEBRIDGE FUNDS
370 17th Street, Suite 3100
Denver, Colorado 80202
PROSPECTUS
NOVEMBER 1, 1998
<PAGE>
STONEBRIDGE FUNDS
370 17th Street, Suite 3100
Denver, Colorado 80202-5631
(800) 639-3935
STONEBRIDGE GROWTH FUND
STONEBRIDGE AGGRESSIVE GROWTH FUND
PROSPECTUS
This prospectus describes two diversified equity portfolios (the "Funds")
offered by the Stonebridge Funds Trust, an open-end investment company (the
"Trust"). The Funds are no-load investments that allow you to buy and sell
shares at net asset value.
Stonebridge Growth Fund is a series of the Trust. Its investment objectives are
long-term growth of capital and increased future income through investment
primarily in common stocks. The Fund uses certain other investment techniques
in an effort to enhance income and reduce market risks.
Stonebridge Aggressive Growth Fund is a series of the Trust. Its principal
objective is long-term growth of capital. A secondary consideration is the
production of short-term income. In order to achieve its investment objectives,
the Fund invests in securities of companies which appear to have good prospects
for increased earnings and dividends and uses certain other investment
techniques in an effort to enhance income and reduce market risks.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INVESTOR IS ADVISED TO READ THIS PROSPECTUS
AND TO RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS SETS FORTH BASIC INFORMATION THAT INVESTORS SHOULD KNOW ABOUT
THE FUNDS PRIOR TO INVESTING AND SHOULD BE RETAINED FOR FUTURE REFERENCE. A
STATEMENT OF ADDITIONAL INFORMATION DATED November 1, 1998 HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS HEREBY INCORPORATED BY
REFERENCE. A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE
UPON REQUEST AND WITHOUT CHARGE BY WRITING OR CALLING THE TRUST.
This Prospectus is dated November 1, 1998
1
<PAGE>
TABLE OF CONTENTS
Annual Fund Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
What are the Funds? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Objectives and Investment Policies. . . . . . . . . . . . . . . . . . . . . 8
Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 18
How to Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
How to Redeem Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . 21
General Account Policies. . . . . . . . . . . . . . . . . . . . . . . . . . 23
2
<PAGE>
ANNUAL FUND EXPENSES
This table and example is designed to assist shareholders in understanding the
various fees and expenses associated with investing in the Funds. Actual
expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when buying, exchanging, or
selling shares of the Funds. ANNUAL FUND OPERATING EXPENSES, which are based
on the amounts incurred by the predecessors of the Funds, for the years ended
October 31, 1997 and November 30, 1997, are paid out of the Funds' assets and
include fees for custodian, management, maintenance of shareholder accounts,
general fund administration, shareholder servicing, accounting and other
services. For more complete descriptions of shareholder transaction expenses
and the Funds' operating expenses, see "General Account Policies" and
"Management of the Funds" in this prospectus and the financial statements and
related notes included in the Statement of Additional Information.
If you own shares through certain service organizations, you may pay account
charges in connection with the maintenance of your account at the service
organization in addition to the expenses shown below.
<TABLE>
<CAPTION>
STONEBRIDGE STONEBRIDGE
SHAREHOLDER TRANSACTION EXPENSES GROWTH FUND AGGRESSIVE GROWTH FUND
----------- ----------------------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price) none none
Maximum Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable) none none
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) none none
Redemption Fees (as a percentage of amount redeemed, if applicable)* none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees (after fee deferral)** .50% .15%
12b-1 Fees none none
Other Expenses (audit, legal, stockholder services, transfer agent
custodian, and miscellaneous) 1.00% 2.75%
Total Fund Operating Expenses (after fee deferral)** 1.50% 2.90%
*A $10 per transaction fee may be imposed on redemption by wire transfer.
**The investment adviser has agreed to defer its management fees, subject to
possible later reimbursement. Management fees would have been 0.75% and 1.00%
and total fund operating expenses would have been 1.75% and 3.75% without such
deferral
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Example: Assume you invest $1,000, the annual return of each Fund is 5%, and
each Funds' annual operating expenses remain as listed listed above. The example
below shows the operating expenses that you would indirectly bear as an investor
in the Funds.
<S> <C> <C>
1 YEAR $15 $29
3 YEARS $48 $91
5 YEARS $82 $155
10 YEARS $180 $326
</TABLE>
Use of this assumed annual return is mandated by the Securities and Exchange
Commission and is not intended to be an illustration of past or future
investment results. THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES.
3
<PAGE>
FINANCIAL HIGHLIGHTS
STONEBRIDGE GROWTH FUND
The information in the following table is for the Stonebridge Growth Fund,
Inc., the predecessor of the Stonebridge Growth Fund series of the Trust.
The information for each of the years ended November 30, 1992 through 1997
has been audited by Hein + Associates LLP, independent auditors, whose report
thereon and on the financial statements and the related notes is included in
the Annual Report for Stonebridge Growth Fund, Inc. incorporated by reference
into the Statement of Additional Information. The per share data and ratios
for each of the four years in the period ended November 30, 1991, were
audited by other auditors whose report dated December 20, 1991, expressed an
unqualified opinion on those selected per share data and ratios. The
information for the six months ended May 31, 1998 was prepared by the
predecessor to the Fund and is unaudited. Further information about the
performance of the Fund is contained in the Fund's latest Annual Report and
Semi-Annual Report, which may be obtained without charge by contacting the
Stonebridge Funds at (800)639-3935.
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING FOR THE
STONEBRIDGE GROWTH FUND THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEARS ENDED
ENDED MAY 31 NOVEMBER 30,
------------ ------------
1998(1) 1997 1996 1995 1994 1993
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $17.69 $16.56 $14.36 $12.61 $12.62 $14.78
---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) .05 .02 .10 .17 .07 .06
NET GAINS OR LOSSES ON SECURITIES
(BOTH REALIZED AND UNREALIZED) 1.15 2.90 2.83 2.34 .29 (.19)
---------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.20 2.92 2.93 2.51 .36 (.13)
---------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
DIVIDENDS (FROM NET INVESTMENT INCOME) (.22) (.28) (.17) (.07) (.07) (.15)
DIVIDENDS (FROM CAPITAL GAINS) (2.69) (1.51) (.56) (.69) (.30) (1.88)
---------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.98 $17.69 $16.56 $14.36 $12.61 $12.62
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
TOTAL RETURN 8.17% 19.79% 21.46% 23.50% 2.81% (1.22)%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000S): $43,668 $42,380 $39,602 $34,775 $30,775 $32,448
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS 1.61%***+ 1.50% 1.47% 1.49% 1.64% 1.60%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS .14%+ .11% .67% 1.27% .53% .50%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE* 11% 41% 45% 38% 36% 56%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID** $.1089 $.1221 $.1359 - - -
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
(1)This data is unaudited.
* A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities(excluding short-term investments) for
a year and dividing it by the monthly average of the market value of the
portfolio securities during the year.
** Per share. For fiscal years beginning on or after September 1, 1995, a fund
is required to disclose its average commission rate for security trades on which
commissions are charged.
***Subsequent to May 31, 1998, the investment adviser began deferring fees to
ensure the Fund's operating expenses do not exceed 1.50% for the year ended
November 30, 1998.
+ Annualized
4
<PAGE>
(CONTINUED)
<TABLE>
<CAPTION>
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING FOR THE STONEBRIDGE GROWTH FUND
THROUGHOUT EACH YEAR FOR THE FISCAL YEARS ENDED NOVEMBER 30,
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.84 $12.55 $14.18 $11.70 $11.04
------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (loss) .15 .30 .22 .20 .12
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED
AND UNREALIZED) 1.10 2.64 (.16) 2.91 1.79
------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.25 2.84 .06 3.11 1.91
------------------------------------------------------------------
LESS DISTRIBUTIONS:
DIVIDENDS (FROM NET INVESTMENT INCOME) (.21) (.22) (.21) (.13) (.10)
DIVIDENDS (FROM CAPITAL GAINS) (1.10) (.33) (1.48) (.50) (1.15)
------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $14.78 $14.84 $12.55 $14.18 $11.70
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL RETURN 8.39% 23.53% .46% 27.89% 18.37%
------------------------------------------------------------------
------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000S): $43,560 $33,710 $29,491 $31,167 $26,829
------------------------------------------------------------------
------------------------------------------------------------------
RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS 1.50% 1.48% 1.70% 1.69% 1.70%
------------------------------------------------------------------
------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS .99% 1.46% 1.69% 1.52% .64%
------------------------------------------------------------------
------------------------------------------------------------------
PORTFOLIO TURNOVER RATE* 45% 22% 64% 83% 32%
------------------------------------------------------------------
------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID** - - - - -
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>
*A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding short-term investments)
for a year and dividing it by the monthly average of the market value of the
portfolio securities during the year.
**Per share. For fiscal years beginning on or after September 1, 1995, a fund
is required to disclose its average commission rate for security trades on which
commissions are charged.
5
<PAGE>
FINANCIAL HIGHLIGHTS
STONEBRIDGE AGGRESSIVE GROWTH FUND
The information in the following table is for the Stonebridge Aggressive
Growth Fund, Inc., the predecessor of the Stonebridge Aggressive Growth Fund
series of the Trust. The information for each of the years ended October 31,
1992 through 1997 has been audited by Hein + Associates LLP, independent
auditors, whose report thereon and on the financial statements and the
related notes is included in the Annual Report for Stonebridge Aggressive
Growth Fund, Inc. incorporated by reference into the Statement of Additional
Information. The per share data and ratios for each of the four years in the
period ended October 31, 1991, were audited by other auditors whose report
dated November 21, 1991, expressed an unqualified opinion on those selected
per share data and ratios. The information for the six months ended April
30, 1998 was prepared by the predecessor to the Fund and is unaudited.
Further information about the performance of the Fund is contained in the
Fund's latest Annual Report and Semi-Annual Report, which may be obtained
without charge by contacting the Stonebridge Funds at (800) 639-3935.
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING FOR THE
STONEBRIDGE AGGRESSIVE GROWTH FUND THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEARS ENDED
ENDED APRIL 30 OCTOBER 31,
-------------- -----------
1998 (1) 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $13.27 $13.19 $13.97 $10.24 $12.07 $11.58
--------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) .53 (.20) (.17) (.26) (.29) (.21)
NET GAINS OR LOSSES ON SECURITIES
(BOTH REALIZED AND UNREALIZED) (.02) 2.83 .90 4.51 .55 1.56
--------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .51 2.63 .73 4.25 .26 1.35
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
DIVIDENDS (FROM NET INVESTMENT INCOME (.58) -- -- -- -- --
DIVIDENDS (FROM CAPITAL GAINS) (1.66) (2.55) (1.51) (.52) (2.09) (.86)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.54 $13.27 $13.19 $13.97 $10.24 $12.07
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL RETURN 7.20% 22.89% 5.70% 43.71% 1.86% 11.80%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000S): $6,133 $5,428 $4,539 $4,151 $2,992 $3,024
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS 3.86***+ 2.90% 2.29% 3.10% 3.51% 2.81%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (2.76)%+ (1.62)% (1.26)% (2.10)% (2.86)% (1.82)%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE* 44% 88% 108% 60% 43% 50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID** $.1272 $.1044 $.1248 - - -
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
(1) This data is unaudited.
*A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding short-term investments)
for a year and dividing it by the monthly average of the market value of the
portfolio securities during the year.
**Per share. For fiscal years beginning on or after September 1, 1995, a fund
is required to disclose its average commission rate for security trades on which
commissions are charged.
***Subsequent to April 30, 1998, the investment adviser began deferring fees to
ensure the Fund's operating expenses do not exceed 2.90% for the year ended
October 31, 1998.
+Annualized
6
<PAGE>
(CONTINUED)
<TABLE>
<CAPTION>
SELECTED DATA FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING FOR THE STONEBRIDGE AGGRESSIVE
GROWTH FUND THROUGHOUT EACH YEAR FOR THE YEARS ENDED OCTOBER 31,
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $13.22 $8.37 $12.27 $11.41 $10.73
------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME (LOSS) (.27) (.23) (.22) (.17) (.30)
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED
AND UNREALIZED) (.20) 5.30 (1.22) 1.66 .98
------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (.47) 5.07 (1.44) 1.49 .68
------------------------------------------------------------------
LESS DISTRIBUTIONS:
DIVIDENDS (FROM NET INVESTMENT INCOME) -- -- -- -- --
DIVIDENDS (FROM CAPITAL GAINS) (1.17) (.22) (2.46) (.63) --
------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.58 $13.22 $8.37 $12.27 $11.41
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL RETURN (4.67)% 61.63% (15.30)% 13.54% 6.34%
------------------------------------------------------------------
------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000S): $3,032 $3,459 $2,247 $2,672 $2,686
------------------------------------------------------------------
------------------------------------------------------------------
RATIO OF OPERATING EXPENSES
TO AVERAGE NET ASSETS 3.03% 3.49% 3.99% 3.28% 3.31%
------------------------------------------------------------------
------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS (2.24)% (2.08)% (2.29)% (1.32)% (2.50)%
------------------------------------------------------------------
------------------------------------------------------------------
PORTFOLIO TURNOVER RATE* 67% 49% 69% 49% 11%
------------------------------------------------------------------
------------------------------------------------------------------
AVERAGE COMMISSION RATE PAID** - - - - -
</TABLE>
*A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding short-term investments)
for a year and dividing it by the monthly average of the market value of the
portfolio securities during the year.
**Per share. For fiscal years beginning on or after September 1, 1995, a fund
is required to disclose its average commission rate for security trades on which
commissions are charged.
7
<PAGE>
WHAT ARE THE FUNDS?
Stonebridge Funds Trust is a Delaware business trust that consists of two
series, Stonebridge Growth Fund and Stonebridge Aggressive Growth Fund.
Shareholders invest in a Fund, a series of the Trust that itself invests in
securities. The Trust is an open-end investment company because, upon demand of
an investor, the Funds have a legal duty to redeem their shares held by the
investor and to pay the investor the net asset value of the shares. See "How to
Invest" and "General Account Policies." The Trust is a type of management
company commonly known as a mutual fund.
The purpose of each Fund is to provide investors with opportunities to acquire
an interest in a comprehensive common stock program under the continuous
supervision of impartial and experienced professional investment management.
Investment companies operate in accordance with their objectives and policies.
The Funds' investment objectives and policies are set forth below under
"Objectives" and "Investment Policies."
With respect to the purchase and sale of investments, the Funds receive
investment advice and other services from Stonebridge Capital Management,
Incorporated (the "Adviser"), which is paid a fee pursuant to its contracts with
the Trust approved by the shareholders. See "Investment Adviser" for a
discussion of the Adviser. The Funds pay costs including custodian, management,
and transfer agency fees, audit and legal fees, brokerage fees and fees for
certain administrative services.
The value of each Fund's shares, which are priced daily, fluctuates with the
value of the securities in which the Fund invests. When a Fund sells portfolio
securities it may realize a gain or a loss, depending on whether it sells them
for more or less than their cost. Each Fund will earn dividend or interest
income to the extent that it receives dividends and interest from its
investments.
The Funds offer their shares to the public at net asset value on a continuous
basis.
OBJECTIVES AND INVESTMENT POLICIES
STONEBRIDGE GROWTH FUND
Stonebridge Growth Fund (the "Growth Fund") principally seeks long term growth
of capital and increased future income through investment primarily in common
stocks. Immediate income return is a secondary consideration. In order to
achieve its investment objectives, the Growth Fund invests primarily in the
common stocks of those companies that, based upon in-depth fundamental research,
appear to have the potential to achieve growth in sales, earnings per share, and
ultimately in dividends at a rate greater than that of the overall economy and
the rate of inflation.
The Adviser believes that companies that are able to achieve above average
records of growth will eventually be rewarded by higher prices for their stocks.
These companies may be large or small and there are no restrictions on the
market capitalization of a company in which the Growth Fund may invest. However,
investors should be aware that during periods of poor economic performance or
adverse market conditions, common stocks and hence the per share value of the
Growth Fund may not reflect favorable
8
<PAGE>
earnings trends. In addition, the securities of smaller companies may be subject
to more volatile market movements and greater risk than the securities of more
well-established companies.
The Adviser selects securities by studying macro-economic and industry trends to
determine where the best opportunities for growth might be found. Companies
operating within these high growth areas of the economy are carefully analyzed
to determine their particular strengths and weaknesses, as well as their global
competitive position. Generally, a company that has the ability to achieve
superior growth will have the following characteristics: it will be a leader in
its industry; have a proprietary product or service; spend heavily on research
and development; have a strong balance sheet with little or no debt; and have a
superior return on equity. Fundamental valuation measures are used to determine
the best relative values given present market prices of stocks being considered
for the Growth Fund.
The Growth Fund's investment policy is based upon the conviction of management
that the long-term growth and prosperity of American business will continue.
Management seeks to attain the objectives of the Growth Fund primarily through
the ownership of securities of companies which possess potential growth in the
years ahead or appear to have good prospects for increased earnings and
dividends and through the use of certain other investment techniques in an
effort to enhance income and reduce market risks. There can be no assurance that
these objectives will be achieved since all investments are subject to risk in
varying degrees. Such objectives are a fundamental policy which can be changed
by the Board of Trustees of the Trust only with approval of the shareholders.
It is the policy of the Growth Fund, which may not be changed without
approval of a majority of the outstanding voting securities of the Growth
Fund, to diversify its investments and not to concentrate its assets in any
one industry. Diversification and non-concentration tend to reduce, though
they do not eliminate, the market risk inherent in all securities. At the
same time they broaden investment opportunities.
While it is the general policy of the Growth Fund to be fully invested in common
stocks, under certain circumstances investments may be made in other types of
securities such as convertible and non-convertible bonds, preferred stocks,
stock index and foreign currency futures, options on stocks and stock indexes,
American Depository Receipts and securities of investment companies and foreign
issuers. The policy of the Growth Fund is that neither investments in bonds nor
investments in preferred stocks will exceed 5% of the Growth Fund's total
assets. For a discussion of the Growth Fund's investments in futures, options,
American Depository Receipts and securities of foreign issuers, see "Foreign
Investments" and "Hedging and Income Enhancement Strategies" below.
In addition, during adverse or transition periods in the stock market, reserves
may be held without percentage limitation in order to protect and preserve the
assets of the Fund. These temporary defensive reserves will be invested in
money market instruments, including U.S. Treasury bills, repurchase agreements
secured by U.S. Government securities, certificates of deposit, high grade
bankers' acceptances, and high grade commercial paper with a maximum maturity of
not more than one year.
9
<PAGE>
STONEBRIDGE AGGRESSIVE GROWTH FUND
Stonebridge Aggressive Growth Fund (the "Aggressive Fund") principally seeks
long-term growth of capital. The production of short-term income is a secondary
consideration. In order to achieve these objectives, management obtains careful
and intensive studies of trends of various industries and companies, including
their earnings, as well as the appreciation possibilities and relative
investment values of their securities.
The Adviser seeks to attain the objectives of the Aggressive Fund primarily
through the ownership of securities of companies which appear to have good
prospects for superior earnings growth. In order to achieve its growth
objective, the Aggressive Fund will often invest in small capitalization
companies which the Adviser believes may have higher growth rates than larger
companies. There can be no assurance that these objectives will be achieved
since all investments are subject to risk in varying degrees. Such investment
policies can be changed by the Board of Trustees of the Trust.
It is a policy of the Aggressive Fund, which may not be changed without approval
of a majority of the outstanding voting securities of the Aggressive Fund, to
diversify its investments and not to concentrate its assets in any one industry.
Diversification and non-concentration tend to reduce, though they do not
eliminate, the market risk inherent in all securities. At the same time they
broaden investment opportunities.
The Aggressive Fund is not restricted to investment in companies of any
particular size, and it will often invest in smaller growth companies as well
as established companies. The securities of smaller companies may be subject
to more volatile market movements and greater risk than the securities of
more established companies. The Adviser believes that proper diversification
will tend to ameliorate the higher volatility. The Fund does not usually
invest in stocks which are not listed on an exchange or on the NASDAQ
National Market System.
It is the general policy of the Aggressive Fund to remain fully invested in
common stocks. However, under certain circumstances, investments may be made
in other types of securities such as convertible bonds, preferred stocks,
American Depository Receipts, futures and options. There may also be times
when, in order to protect and preserve the assets of the Aggressive Fund, the
Adviser may hold significant portions of the Aggressive Fund's assets in
cash, money market funds or short-term U.S. Treasury securities, or make
investments in those industries which will best afford such protection.
OTHER INVESTMENT POLICIES
Neither Fund may invest an amount which exceeds 5% of the value of its total
assets in the securities of any one issuer. This restriction does not apply
to holdings of U.S. Government securities. In no event will more than 25% of
either Fund's assets be invested in any one industry (other than the U.S.
Government).
The Funds do not trade actively for quick profits; however, changes are made in
the portfolios whenever such action appears desirable to the Adviser. During
periods of broad economic growth, emphasis is placed on seeking investments in
leading companies in those industries that are expected to lead the expansion.
During periods when the economy is sluggish, emphasis is placed on seeking to
invest in companies
10
<PAGE>
selected because of their individual prospects for improved earnings. The
Adviser has approached these decisions with essentially the point of view of
long-term investing but securities may occasionally be sold for investment
reasons even though they have been held for short periods. Therefore, there may
be a limited number of short term transactions. This flexibility gives the
Adviser freedom to adjust the Funds' portfolios to changing business conditions.
Because of this policy, it is anticipated that the annual portfolio turnover
will normally be in the range of 25% to 75% for the Growth Fund and 25% to 100%
for the Aggressive Fund. A 50% turnover rate would occur, for example, if half
of the value of a Fund's portfolio were replaced in a period of one year. The
rate of portfolio turnover for the Funds for the most recent years and for prior
years appears in the table of Financial Highlights above. Brokerage costs to
the Funds are normally commensurate with the rate of activity in the portfolios.
The investor should consider the tax consequences of these policies as discussed
in the section "Distribution and Taxes" below.
Maintaining the purchasing power of the capital of the Funds is an important
consideration of management in the determination of investment policy, but there
can be no assurance that investors in the Funds will be protected from the
effects of inflation. The principal risk factor generally attendant to
investment in an investment company with investment policies and objectives
similar to those of the Funds is the market risk inherent in investment in the
underlying securities in which the Funds invest. An additional risk factor
peculiar to investment in the Funds arises from the fact that long-term growth
is sought by the Funds at the possible expense of short-term profits.
COMMON STOCKS. Investments in common stocks have over the long term provided
returns superior to those achieved through investment in bonds or money market
instruments. However, in the short to intermediate term, returns can vary
substantially from year to year and it is probable that there will be periods
when the net asset value of the Funds will decline. Diversification and
temporary reserves can be expected to reduce the risks inherent in investing in
common stocks but will not eliminate such risk. Accordingly, investors should be
prepared and able to maintain their investment in the Fund during periods when
the market declines.
FOREIGN INVESTMENTS. Each Fund may invest up to 20% of its assets, either
directly or indirectly through investments in American Depository Receipts
("ADRs") and closed-end investment companies, in securities issued by foreign
companies wherever organized.
ADRs are receipts issued by an American bank or trust company evidencing
ownership of underlying securities issued by a foreign issuer. ADRs may be
listed on a national securities exchange or may trade in the over-the-counter
market. ADR prices are denominated in United States dollars; the underlying
security may be subject to foreign government taxes which would reduce the yield
on such securities. ADRs may be sponsored by the foreign issuer or may be
unsponsored (organized independently from the foreign issuer). Available
information regarding the foreign securities underlying unsponsored ADRs may not
be as current as for sponsored ADRs, and the prices of unsponsored ADRs may be
more volatile.
Securities of closed-end investment companies investing in foreign securities
may be acquired by the Funds within the limits prescribed by the Investment
Company Act of 1940. Each Fund currently intends to limit such investments so
that, immediately after such investment: (a) not more than 5% of the value of
its total assets will be invested in the securities of any one investment
company; (b) not more than 10% of the value
11
<PAGE>
of its total assets will be invested in the aggregate in securities of
investment companies as a group; and (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by each of the Funds.
The Funds will invest in closed-end investment companies only in furtherance of
their investment objectives. Growth in appreciation and dividends in foreign
markets sometimes occurs at a faster rate than in domestic markets. The ability
of the Funds to invest in closed-end investment companies that invest in foreign
securities provides, indirectly, greater variety and added expertise with
respect to investments in foreign markets than if the Funds invested directly in
such markets. Such companies themselves, however, may have policies that are
different from those of the Funds and will bear management and other expenses of
the same type as those paid by the Funds that may be greater or lesser in amount
than those paid by the Funds. No adjustments will be made to the advisory fee
with respect to assets of the Funds invested in such investment companies.
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the United States securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing and
financial reporting requirements comparable to those applicable to domestic
issuers. Investments in foreign securities also involve the risk of possible
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, political or financial instability or diplomatic and
other developments which could affect such investments. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States. The extent to which the Funds will be
invested in foreign companies will fluctuate from time to time within the 20%
limitation stated above depending on the Adviser's assessment of prevailing
market, economic and other conditions.
HEDGING AND INCOME ENHANCEMENT STRATEGIES. In addition to its investments in
securities, each Fund may buy and sell stock and stock index options, stock
index and foreign currency futures contracts, and options on futures with
respect to all or a portion of its assets. Transactions in such options and
futures contracts may afford the Funds the opportunity to hedge against a
decline in the value of securities they own, may provide a means for the Funds
to generate additional income on their investments or may provide opportunities
for capital appreciation. The Funds may also purchase and sell stock index
futures contracts and options to manage cash flow and to attempt to remain fully
invested in the stock market. Although the Funds have no specific fundamental
limitations on their ability to engage in options and futures contracts, they do
not use options or futures contracts for speculative purposes. The Funds may
engage in additional hedging techniques as new techniques become available.
OPTIONS TRANSACTIONS. Each Fund may write covered put and call options on
stocks and stock indexes to attempt to increase the return on its investments
through the receipt of premium income. Each Fund also may write put options and
purchase call options on stocks and stock indexes to increase its exposure to
the stock market when the Fund has cash from new investments or holds a portion
of its assets in money market instruments or to protect against an increase in
prices of securities it intends to purchase. When a Fund wishes to sell
securities because of shareholder redemptions or to protect the value of
securities it owns against a decline in market value, it may write call options
and purchase put options.
12
<PAGE>
A call option gives the purchaser, in return for payment of the option premium
(the option's current market price), the right to buy the option's underlying
security at a specified exercise price at any time during the term of the
option. The writer of a call option, who receives the premium, assumes the
obligation to deliver the underlying security against payment of the exercise
price at any time the option is exercised. A put option is a similar contract
that gives the purchaser of the option, in return for the premium paid, the
right to sell the underlying security at a specified exercise price at any time
during the term of the option. The writer of the put receives the premium and
assumes the obligation to buy the underlying security at the exercise price
whenever the option is exercised. The premium paid for purchasing an option
reflects, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates. Each Fund intends to limit
the aggregate value of the securities underlying the calls or obligations
underlying the put options to no more than 25% of its net assets taken at market
value, determined as of the date the options are written. All options, whether
written or purchased, will be listed on a national securities exchange and
issued by the Options Clearing Corporation.
Call options written by a Fund are "covered" if the Fund owns the call options'
underlying securities or have an absolute and immediate right to acquire those
securities without the payment of additional consideration (or upon payment of
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities they own. A call option written
by a Fund is also covered if the Fund owns, on a share-for-share basis, call
options on the same securities whose exercise price are equal to or less than
the calls written, or greater than the exercise prices of the calls written if
the differences are maintained by the Fund in cash or liquid securities in a
segregated account with its custodian. Put options written by a Fund are
"covered" if the Fund maintains cash or liquid securities with a value equal to
the put options' exercise prices in segregated accounts with the Trust's
custodian, or else own, on a share-for-share basis, put options on the same
securities whose exercise prices are equal to or greater than the puts written.
Securities held by a Fund to cover options may not be sold so long as the Fund
remains obligated under the options, unless the securities are replaced by
other appropriate securities.
A stock index assigns relative value to the common stocks included in the index
(for example, the Standard & Poor's 500 or the New York Stock Exchange Composite
Index), and the stock index fluctuates with changes in the market value of such
stocks. An option on an index gives the holder the right, in return for the
premium paid, to require the writer to pay cash equal to the difference between
the closing price of the index and the exercise price of the option, times a
specified multiplier. No actual delivery of the stocks underlying the index is
made.
FUTURES TRANSACTIONS AND OPTIONS ON FUTURES. Each Fund may purchase and sell
stock index and foreign currency futures contracts (as well as purchase and sell
related options on such futures contracts) as a hedge against changes resulting
from market conditions and exchange rates in the values of the domestic and
foreign securities held by the Fund or which it intends to purchase and where
the transactions are economically appropriate for the reduction of risks
inherent in the ongoing management of the Fund. A stock index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of the last trading day of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the underlying stocks in the index is made. A foreign
currency
13
<PAGE>
futures contract creates an obligation on one party to deliver, and a
corresponding obligation on another party to accept delivery of, a stated
quantity of a foreign currency, for an amount fixed in United States dollars.
The Funds may purchase and sell foreign currency futures contracts as a hedge
against changes in currency exchange rates when the Funds are invested in the
securities of foreign issuers.
A Fund may not purchase or sell futures contracts and related options unless
immediately after any such transaction, the aggregate initial margin that is
required to be posted by the Fund under the rules of the exchange on which
the futures contract ( or futures option) is traded, plus any premium paid by
the Fund on its open futures options positions, does not exceed 5% of the
Fund's total assets, after taking into account any unrealized profits and
losses on the Fund's open contracts and excluding the amount that a futures
option is "in the money" at the time of purchase. (An option to buy a futures
contract is "in the money" if the then current purchase price of the contract
that is subject to the option exceeds the exercise or strike price; an option
to sell a futures contract is "in the money" if the exercise or strike price
exceeds the then current purchase price of the contract that is the subject
of the option.)
RISKS INHERENT IN TRANSACTIONS IN OPTIONS AND FUTURES CONTRACTS. In
selecting futures contracts and options for the Funds, the Adviser will
assess such factors as current and anticipated stock prices and interest
rates, the relative liquidity and price levels in the options and futures
markets compared to the securities markets, and the Funds' cash flow and cash
management needs. If the Adviser judges these factors incorrectly, or if
price changes in a Fund's futures or options positions are not well
correlated with its other investments, use of the futures contracts and
options may leave the Fund in a worse position than if it had not used these
strategies. Other risks inherent in the use of options, foreign currency and
stock index futures contracts and options on futures contracts include the
fact that skills needed to use these strategies are different from those
needed to select portfolio securities, the imperfect correlation between
movements in the price of the options and futures contracts and movements in
the price of the securities or currencies which are the subject of the hedge,
the possible absence of a liquid secondary market for any particular
instrument at any time and the possible need to defer closing out certain
hedged positions to avoid adverse tax consequences.
CURRENCY EXCHANGE CONTRACTS. The AggressiveFund may enter into currency
exchange contracts (agreements to exchange dollars for foreign currencies at
a future date) to manage exchange rate risk. Currency exchange contracts
allow the Adviser to hedge the Fund's foreign investments against adverse
exchange rate changes. Successful currency hedging depends upon the
Adviser's ability to predict foreign currency values. A currency exchange
contract will tend to offset both positive and negative currency fluctuations
but will not offset other changes in the value of the Aggressive Fund's
foreign investments. The Aggressive Fund does not and will not use currency
exchange contracts for speculative purposes.
14
<PAGE>
MANAGEMENT OF THE FUNDS
ORGANIZATION OF THE TRUST
The Trust is organized as a Delaware business trust. Each Fund is a series of
the Trust and each Fund's shares are beneficial ownership interest of the
respective Fund. Shareholders of the Funds have rights and privileges similar
to those of corporate shareholders.
The Fund does not intend to hold annual meetings except as required by the
Investment Company Act of 1940. Each share outstanding on the record date has
one vote (with proportional voting for fractional shares). Shareholders will
vote in the aggregate and not by Fund except as otherwise required by law or
when the Board of Trustees determines that a matter to be voted on affects only
the interest of a particular Fund. The holders of two-thirds of the outstanding
shares of the Trust may remove a Trustee at a shareholder meeting called by
written request of the holders of at least 10% of the outstanding shares of the
Trust.
Prior to November 1, 1998, the Funds were organized as individual Delaware
corporations. The Aggressive Fund and the Growth Fund were originally organized
on October 1, 1956 and November 13, 1958, respectively.
BOARD OF TRUSTEES
The overall management of the business of the Funds is vested with the Board of
Trustees. The Board of Trustees approves all significant agreements between the
Trust and persons or companies furnishing services to the Funds, including the
Trust's agreements with its investment adviser, administrator, transfer agent,
custodian and dividend disbursing agent. The day-to-day operations of the Funds
(apart from the Adviser's duties as investment adviser) are delegated to the
administrator of the Funds, subject always to the objectives and policies of
the Funds and the general supervision of the Board of Trustees.
INVESTMENT ADVISER
Stonebridge Capital Management, Incorporated, 1801 Century Park East, Suite
1800, Los Angeles, California 90067, is retained as the Adviser to the Funds
pursuant to written Investment Advisory Agreements (the "Agreements"). The
Agreements were approved by the Board of Trustees on August 25, 1998.
The Agreements require the Adviser to supervise the investment of the assets of
the Funds, and place orders with securities broker/dealers for the purchase or
sale of securities on behalf of the Funds, subject to the policies and controls
of the Board of Trustees. In doing so, the Adviser is to obtain and evaluate
information, reports and studies, some or all of which may be provided to the
Adviser by the securities broker/dealers that execute securities transactions
for the Funds, for which their compensation may consist solely of the brokerage
commissions paid by the Funds.
As a consideration for furnishing such services, the Agreements provide that the
Adviser will receive advisory fees paid monthly based on an annual rate of 0.75%
of the Growth Fund's average daily net assets and 1.00% of the Aggressive Fund's
average daily net
15
<PAGE>
assets. The Adviser has agreed that it will limit the overall annual expenses
of the Growth Fund to 1.50% of average net assets and of the Aggressive Fund to
2.90% of average annual net assets for the current fiscal year and all future
fiscal years through October 31, 2002; any unreimbursed Fund expenses borne by
the Adviser in any fiscal year pursuant to this limitation will be reimbursed to
the Adviser at any year in the future if, after the reimbursement, the expenses
of the Growth or Aggressive Fund for such year are less than 1.50% and 2.90%,
respectively, of its average net assets.
During the following respective fiscal years of the predecessors of the Funds,
the Adviser received fees in the following amounts:
<TABLE>
<CAPTION>
November 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Growth Fund
Total $173,492 $101,700 $97,356
% of Net Assets .41% .30% .30%
<CAPTION>
October 31,
1997 1996 1995
---- ---- ----
Aggressive Fund
Total $33,293 $25,253 $17,491
% of Net Assets .60% .50% .50%
</TABLE>
The Agreements provide that they will remain in force and effect with respect to
each Fund for two years and thereafter from year to year so long as such
continuances are approved at least annually by the Board of Trustees or by a
majority of the outstanding voting securities of the Fund, but in either event
they must be approved by a majority of the Trustees who are not parties to the
Agreements or interested persons of any such party. The Agreements also provide
that they may be terminated without penalty with respect to each Fund at any
time by the Board of Trustees or by vote of a majority of the Fund's outstanding
voting securities or by the Adviser upon sixty days written notice and that the
Agreements will terminate automatically in the event of their assignment.
The Adviser is owned by seven of its employees. Richard C. Barrett, Chairman of
the Board and Vice President of the Fund and President of the Adviser, has been
primarily responsible for the day-to-day management of Growth Fund and its
predecessor since 1994. Charles Woodhouse, President of the Fund, has been
primarily responsible for the day-to-day management of the Aggressive Fund and
its predecessor since July 1998. Although the organizational arrangements of
the Adviser do not require that all investment decisions be made by committee,
it is the practice of the Adviser to make such decisions by committee.
ADMINISTRATOR
ALPS Mutual Funds Services, Inc., 370 17th Street, Suite 3100, Denver, Colorado
80202, ("ALPS") has been the Administrator of the Trust and its predecessor
since 1997 pursuant to a written Administration Agreement ("Administration
Agreement"). The Administration Agreement was approved by the Board of Trustees
on August 25, 1998.
The Administration Agreement provides that ALPS will supervise and manage the
business of the Funds subject to the direction and control of the officers and
Trustees of the Trust. This responsibility requires that
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<PAGE>
ALPS provide certain services and facilities including, but not limited to, the
services of an administrator for the Funds and other personnel required by the
Funds, office space, furniture, equipment, supplies, files and records,
supervision of the maintenance of the books and records of the Funds, and the
supervising of the relationship between the Trust and its shareholders,
custodian, fund accounting agent, transfer agent and others, including the
preparation of registration statements and proxy material.
The Administration Agreement provides that it will remain in force and effect
until July 31, 2000 and will continue thereafter from year to year provided that
its continuance is specifically approved at least annually by a majority of the
Trustees. The Administration Agreement may be terminated for cause during its
initial term and thereafter may be terminated without penalty at any time by the
Trustees or by the Administrator upon ninety days written notice.
As consideration for furnishing such administration services, the Administration
Agreement provides that ALPS will receive a monthly management fee at the annual
rate of .10% of the average daily net assets of each Fund up to $250,000,000 and
.075% of the average daily net assets of each Fund in excess of $250,000,000. At
all times ALPS' fee will be no less than $6,250 per month per Fund.
THE DISTRIBUTOR
ALPS Mutual Funds Services, Inc. 370 17th Street, Suite 3100, Denver, Colorado
80202 serves as the Distributor and principal underwriter of the Funds' shares
without compensation and bears the expense of distribution of the shares of the
Funds.
THE CUSTODIAN
The Funds' Custodian is Fifth Third Bank, Fifth Third Center, Cincinnati, Ohio
45263.
THE TRANSFER AGENT
The Funds' transfer agent and dividend disbursing agent is National Financial
Data Services, 330 West 9th Street, Kansas City, Missouri 64105.
REPORTS TO SHAREHOLDERS
The Trust will send a statement of account to all shareholders quarterly and a
confirmation after every transaction that affects share balance or account
registration with the exception of automatic investment plan transaction and
dividend reinvestment transactions. These transactions are reflected on a
statement which is sent to shareholders on a quarterly basis. A statement with
tax information will be mailed to all shareholders by January 31 of each year
and filed with the Internal Revenue Service.
Each year, the Trust will send an annual and a semi-annual report to all
shareholders. The annual report includes audited financial statements and a
list of portfolio securities as of the fiscal year end. The semi-annual report
includes unaudited financial statements for the first six months of the fiscal
year, as well as a list of portfolio securities at the end of the period.
Investors should read these materials carefully to help
17
<PAGE>
understand investments in the Funds. Accounts opened through qualified
broker/dealers, banks or other institutions ("Service Organizations") may
receive certain reports, including account statements directly from the Service
Organization. For more information see section "General Account Policies" in
this prospectus.
- --------------------------------------------------------------------------------
Confirmations The Trust will mail to shareholders a transaction
report any time shares are purchased, redeemed or
exchanged.
- --------------------------------------------------------------------------------
Quarterly Confirmations At the end of each calendar quarter the Trust will
send to shareholders a transaction report to show
the year-to-date activity in their account.
- --------------------------------------------------------------------------------
Financial Statements The Trust will mail to shareholders a semi-annual
report in June and an audited annual report in
December of each year. These reports include each
Fund's financial statements and a list of
portfolio securities at the end of the period.
- --------------------------------------------------------------------------------
Tax Statements The Trust will mail to shareholders FORM 1099-DIV
and/or 1099-B in January for any dividends
shareholders received or redemptions in their
account. In addition, other tax forms will be
sent to shareholders as required by the Internal
Revenue Service. All tax forms are filed with the
Internal Revenue Service.
- --------------------------------------------------------------------------------
Prospectus The Trust will mail an updated prospectus to
shareholders in February
or as updated.
- --------------------------------------------------------------------------------
Duplicate mailings of Fund materials to shareholders who reside at the same
address may be eliminated.
DISTRIBUTIONS AND TAXES
TAX QUALIFICATION OF THE FUNDS
Each Fund has qualified and intends to continue to qualify and elect to be taxed
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). In any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net investment income, the
Fund will be relieved of Federal income tax on the net investment income and net
realized capital gains distributed to shareholders. One of the requirements a
Fund must meet in order to qualify under Subchapter M as a regulated investment
company is that at least 90% of the Fund's gross income be derived from certain
sources, which include dividends, interest, payments with respect to securities,
loans and gains from the sale or other disposition of stock or securities. In
addition the Fund must meet certain asset diversification requirements.
DISTRIBUTIONS
The Funds' income from dividends and interest and any net realized short-term
capital gains is paid to shareholders as income dividends each December. The
Funds realize capital gains whenever they sells securities for a higher price
than they paid for them. Net realized medium-term and long-term gains are paid
to shareholders as capital gain dividends each December. A dividend will reduce
the net asset value of a Fund share by the amount of the dividend.
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<PAGE>
Net investment income and net short-term capital gains distributed by the Fund,
if any, will be taxable to shareholders as ordinary income whether received in
cash or additional shares. Any net long-term capital gains realized by the
Fund, and distributed, will be taxable to shareholders as long-term capital
gains regardless of the length of time investors have held their shares.
A 4% non-deductible excise tax is imposed on a regulated investment company
which fails to distribute to its shareholders a specified amount of its taxable
ordinary income and capital gains during a calendar year.
Dividends from net investment income are taxable to the shareholders as ordinary
income and are generally eligible, in the case of corporations, for the 70%
deduction for corporate shareholders provided by the Code. Capital gains
distributions do not qualify for such exclusion. For the predecessors of the
Growth Fund, 100% of the dividends paid for fiscal year end November 30, 1997
was eligible for such exclusion. For the predecessors of the Aggressive Fund
there were no dividends paid from investment income for the year ended October
31, 1997.
Shareholders who are citizens or residents of the United States pay federal
taxes at capital gains rates on long-term capital gains which are distributed to
them, whether or not reinvested in the Funds, and regardless of the period of
time that such shares have been owned by the shareholders. Advice as to the tax
status and amount of each year's dividends and distributions will be mailed
annually.
The Funds may be required to withhold for Federal income taxes 31% of
distributions payable to shareholders who fail to provide the Trust with
their correct taxpayer identification numbers or make required
representations, or who have been notified by the Internal Revenue Service
they are subject to back-up withholding. Corporate shareholders, and other
shareholders specified by the Code, are exempt from back-up withholding.
HOW TO INVEST
This section tells you how to purchase, exchange and redeem shares of the Funds.
It also explains various services and features offered in connection with your
account. Please call 1-800-639-3935 to speak with a Shareholder Services
Representative if you have any questions or need information. ALPS Mutual Funds
Services, Inc. is the distributor for the Funds and its principal office is
located at 370 17th Street, Suite 3100, Denver, CO 80202.
HOW TO OPEN AND ADD TO YOUR ACCOUNT
You may open an account and purchase shares of the Funds by completing an
Account Application and returning it to Stonebridge Funds with your check made
payable to the applicable Fund. You may obtain an Account Application by
calling 1-800-639-3935.
TO OPEN AN ACCOUNT
By Mail Send a completed Account Application and a check or money
order payable in U.S. dollars and drawn on a bank located in
the U.S. to Stonebridge Growth Fund or Stonebridge
Aggressive Growth Fund, P.O. Box 419247, Kansas City, MO
64141-9247.
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<PAGE>
In Person Bring your completed Account Application and a check or
money order payable in U.S. dollars and drawn on a bank
located in the U.S. to Stonebridge Growth Fund or
Stonebridge Aggressive Growth Fund, 370 17th Street, Suite
3100, Denver, CO 80202.
Automatically Complete the Automatic Investment Plan Section of your new
(from your bank Account Application or Account Options form to have money
account) automatically withdrawn from your bank account ($100 minimum
per transaction), and return it to Stonebridge Funds, P.O.
Box 419247, Kansas City, MO 64141-9247.
By Wire Call 1-800-639-3935 to receive wiring instructions.
TO ADD TO AN ACCOUNT
By Mail Send a check or money order payable in U.S. dollars and
drawn on a bank located in the U.S. to Stonebridge Growth
Fund or Stonebridge Aggressive Growth Fund, P.O. Box
419247, Kansas City, MO 64141-9247. Specify your account
number and the name of the Funds in which you are investing.
In Person Bring your check or money order payable in U.S. dollars and
drawn on a bank located in the U.S. to Stonebridge Growth
Fund or Stonebridge Aggressive Growth Fund, 370 17th Street,
Suite 3100, Denver, CO 80202.
Automatically Complete an Automatic Investment Plan application to have
(from your bank $100 or more automatically withdrawn from your bank account
account) monthly. Call 1-800-639-3935 to receive an
application.
By Wire Call 1-800-639-3935 to receive wiring instructions.
<TABLE>
<CAPTION>
MINIMUM INVESTMENTS GROWTH FUND AGGRESSIVE FUND
<S> <C> <C>
To open a new account $1,000 $250
To open a new retirement or certain other accounts $1,000 $250
To open a new account with an Automatic Investment Plan $0 $0
To add to any type of an account $100 $250
</TABLE>
The minimum investment requirements do not apply to reinvested dividends,
purchases by Service Organizations acting on behalf of their customers,
officers, trustees, directors, employees and retirees of the Trust, Investment
Adviser, Administrator or any direct or indirect subsidiary, or any spouse,
parent or child of any of these persons.
Please note: Third-party checks will not be accepted for the purchase of
shares of the Funds. The Trust reserves the right to suspend the continuing
offering of shares and to reject any purchase order in its sole discretion.
20
<PAGE>
HOW TO EXCHANGE FUND SHARES
You may exchange shares of either Fund for shares of the other Fund. Exchanges
must be for at least $1,000 in value per transaction into the Growth Fund and
$250 in value per transaction into the Aggressive Fund. For further information
on the exchange privilege, please call a Shareholder Services Representative at
1-800-639-3935.
The Trust may modify or terminate the exchange privilege, but will not
materially modify or terminate it without giving shareholders 60 days' notice.
By Telephone Call 1-800-639-3935, and give the account name, account number,
name of Fund and amount of exchange.
By Mail Send a written request to: Stonebridge Funds, P.O. Box 419247,
Kansas City, MO 64141-9247.
Your written request must:
- be signed by each account owner
- state the number or dollar amount of shares to be exchanged
- include your account number or tax identification number
HOW TO REDEEM FUND SHARES
Any sale, exchange, or change in registration may result in a taxable gain or
loss reported to you and the IRS.
You may redeem your shares on any business day. If you have any questions about
redeeming your shares, please call a Shareholder Services Representative at
1-800-639-3935. Your shares will be redeemed at the current-day closing price
if you call before the close of the New York Stock Exchange ("NYSE")
(normally, 4:00 p.m. Eastern Time on a business day). Otherwise, you will
receive the closing price on the next business day. Redemption proceeds
generally will be sent by check to the shareholder(s) of record at the address
of record within 7 days after receipt of a valid redemption request.
If you have authorized the wire redemption service, your redemption proceeds
will be wired directly into your designated bank account, normally within 3
business days after receipt of a valid redemption request. A wire fee of $10
will be added to your redemption request.
Payment may be postponed or the right of redemption suspended at times when
the NYSE is closed for other than customary weekends and holidays, when
trading on an exchange is restricted, when an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
21
<PAGE>
If you have selected the Systematic Withdrawal Plan, your redemption proceeds
will be electronically transferred to your designated bank account within 7 days
after withdrawal on approximately the 20th day of the month.
If the shares being redeemed were purchased by check, telephone or through the
Automatic Investment Program, the Funds may delay the mailing of your redemption
check for up to 15 days from the day of purchase to allow the purchase check to
clear.
Back-up withholding is deducted if your account has no tax identification number
or an incorrect tax identification number. In this situation, the Fund must
remit 31% of redemption proceeds and dividend distributions to the IRS as an
advance tax payment. Back-up withholding should not apply if your provided your
tax identification number on your account application or on IRS Form W-9.
The Funds have filed an election pursuant to Rule 18f-1 under the Investment
Company Act of 1940 which provides that a Fund is obligated to redeem shares
solely in cash up to $250,000 or 1% of the Fund's net asset value, whichever is
less, for any one shareholder within a 90-day period. Any redemption beyond
this amount may be made in proceeds other than cash.
By Telephone Call 1-800-639-3935 and give the account name, account
number, name of Fund and amount of redemption ($1,000
minimum). (Available only if you check the appropriate box
on the Account Application).
If you do not have and would like to add the telephone
redemption feature, send a written request to Stonebridge
Funds, P.O. Box 419247, Kansas City, MO 64141-9247. The
request must be signed (and signatures guaranteed) by each
account owner. The Trust may impose a dollar limit on
telephone redemptions. (Not available for retirement
accounts).
In Person During normal business hours, bring your written request to:
Stonebridge Funds
370 17th Street
Suite 3100
Denver, CO 80202
By Mail Send a written request to Stonebridge Funds, P.O. Box
419247, Kansas City, MO 64141-9247.
Your written request must:
- be signed by each account owner; a signature guarantee is
required for any redemption over $10,000 or any
redemption being mailed to any address or payee other
than that which is on record;
- state the number or dollar amount of shares to be
redeemed;
- include your account number and tax identification number.
22
<PAGE>
By Wire Call 1-800-639-3935 or write Stonebridge Funds, P.O. Box
419247, Kansas City, MO 64141-9247. You will need to
provide account name and number, name of Fund and amount of
redemption ($1,000 minimum per transaction if made by wire).
If you have already opened your account and would like to
have the wire redemption feature, send a written request to
Stonebridge Funds, P.O. Box 419247, Kansas City, MO
64141-9247. The request must be signed (and signatures
guaranteed) by each account owner.
The Trust charges a fee of $10 for wire transfers which is
added to any redemption (your proceeds are reduced by $10 in
the event there is an insufficient amount remaining). In
addition, your bank may charge a fee for receiving a wire.
By Systematic Request monthly or quarterly withdrawals of $50 or more in
Withdrawal multiples of $10. Participation requires $10,000 in the
Fund. See discussion in "General Account Policies".
GENERAL ACCOUNT POLICIES
ACCOUNTS OPENED THROUGH A SERVICE ORGANIZATION
You may purchase or sell Fund shares through an account you have with
Stonebridge Capital Management or through a Service Organization. Your Service
Organization may charge transaction fees on the purchase and/or sale of your
shares and may require different minimum initial and subsequent investments than
the Funds require. Service Organizations may also impose charges, restrictions,
transaction procedures or cut-off times different from those applicable to
shareholders who invest in the Funds directly.
A Service Organization may receive fees from Stonebridge Capital Management for
providing services to the Funds or their shareholders. Such services may
include, but are not limited to, shareholder assistance and communication,
transaction processing and settlement, account set-up and maintenance, tax
reporting and accounting.
In certain cases, a Service Organization may elect to credit against the fees
payable by its customers all or a portion of the fees received from Stonebridge
Capital Management with respect to their customers' assets invested in the
Funds. The Service Organization, rather than you, may be the shareholder of
record of your shares. The Funds are not responsible for the failure of any
Service Organization to carry out its obligations to its customers.
ADDRESS CHANGES
To change the address on your account, call 1-800-639-3935 or send a written
request signed by all account owners. Please include:
- Name of the Fund
- Account number(s)
- Name(s) on the account
- Both the old address and new addresses.
23
<PAGE>
Certain options may be suspended for 30 days following an address change unless
a signature guarantee is provided.
DISTRIBUTIONS
When you open an account, you must specify on your Account Application whether
you want to receive your distributions in cash. Otherwise, all distributions
will be reinvested. You may change your distribution option at any time by
writing or calling 1-800-639-3935.
Prior to purchasing shares of a Fund, the impact of dividends or capital gains
distributions which have been declared but not paid should be carefully
considered. Any such dividends or capital gains distributions paid to an
investor shortly after the purchase of shares by the investor will have the
effect of reducing the per share net asset value of the shares by the amount of
the dividends or distributions. All or a portion of such dividends or
distribution, although in effect a return of capital, is subject to taxes, which
may be at ordinary income tax rates.
EXPRESS MAIL
You may request many of the above transactions via express mail to
Stonebridge Funds
330 West 9th Street
Kansas City, MO 64105
Note: Redemptions will not be delivered via express mail. To expedite
delivery, your redemption proceeds may be sent via automated clearing house or
wire (fees are charged by the Fund, and, may be charged by your financial
institution). Please see redemption section above.
INVOLUNTARY REDEMPTIONS
The Trust reserves the right to close an account if the shareholder is deemed to
engage in activities which are illegal or otherwise believed to be detrimental
to the Trust. In the case of activity believed to be detrimental to the
Trust, we will provide written notice to you or your Service Organization
representative prior to closing your account.
PRICE OF FUND SHARES
All purchases, redemptions and exchanges will be processed at the net asset
value ("NAV") next calculated after your request and payment, if required, are
received by the transfer agent in proper form. The Funds' NAV is determined by
the Administrator as of the close of regular trading on the New York Stock
Exchange (the "NYSE"), normally 4:00 p.m. (Eastern time), on each day that the
NYSEis open.
In order to receive a day's price, your order must be received by the transfer
agent by the close of regular trading on the NYSE on that day. If not, your
request will be processed at the Fund's NAV at the close of regular trading on
the next day. To be in proper form, your order must include your account number
and must state the Fund shares you wish to purchase, redeem or exchange.
24
<PAGE>
In the case of participants in certain employee benefit plans investing in a
Fund, purchase orders will be processed at the NAV next determined after the
Service Organization acting on their behalf receives the purchase order.
Each Fund's NAV is calculated by dividing the total value of its investments and
other assets, less liabilities, by the total number of Fund shares outstanding.
The Funds' investments are valued at market value or, when market quotations are
not readily available, at fair value as determined in good faith by or under the
direction of the Board of Trustees. Debt securities with maturities of 60 days
or less are valued at amortized cost, which generally equals market value.
REDEMPTION OF LOW BALANCE ACCOUNTS
If your account balance falls below $1,000 in the Growth Fund and $250 in
Aggressive Fund as a result of redemption, a letter will be sent advising you to
either bring the value of the shares held in the account up to the minimum or to
establish an automatic investment that is the equivalent of at least $100 per
month. If the action is not taken within 90 days after notice, your account may
be closed and the proceeds sent to you at the address of record. The Trust
reserves the right to increase investment minimums.
REGISTRATION CHANGES
To change the name on an account, the shares are generally transferred to a new
account. In some cases, legal documentation may be required. Registration
changes may involve a change in ownership which may result in a taxable gain or
loss reported to you and the IRS.
SYSTEMATIC CASH WITHDRAWAL PLAN
A shareholder owning $10,000 or more shares of a Fund at net asset value may
establish a Systematic Cash Withdrawal Plan (a "Withdrawal Plan") with respect
to the Fund upon completion of an authorized form. Qualified participants may
receive monthly or quarterly checks of $50 or more in multiples of $10 as they
choose. The redemption is made on the 20th day of the month and payment is made
within seven days thereafter.
These payments are drawn from shares redeemed from the shareholder's account to
meet the payment amounts requested. If redemptions exceed dividends and capital
gains distributions, participants will eventually deplete their investments,
particularly if the net asset value of the Fund decreases. A systematic
withdrawal participant may stop receiving payments at any time, and resume them
at any time thereafter. The Trust reserves the right to cancel any Withdrawal
Plan.
Under this program, all dividends and capital gains distributions are
reinvested. Amounts paid to shareholders should not be considered income. No
particular amount of periodic or quarterly payments is recommended. An
authorization form may be obtained from the Trust at 1-800-639-3935.
SIGNATURE GUARANTEE
A signature guarantee assures that a signature is genuine. The signature
guarantee protects shareholders from unauthorized transfers. A signature
guarantee is not the same as a notarized signature. You can obtain a signature
guarantee from a bank or trust company, credit union, broker, dealer, securities
exchange or association, clearing agency or savings association.
25
<PAGE>
The guarantee must be an ink stamp or medallion that states "Signature(s)
Guaranteed" and must be signed in the name of the guarantor by an authorized
person with that person's title and the date. The Trust may reject a signature
guarantee if the guarantor is not a member of or participant in a signature
guarantee program. Call your financial institution to see if they have the
ability to guarantee a signature.
TO PROTECT YOUR ACCOUNTS FROM FRAUD, THE FOLLOWING TRANSACTIONS WILL REQUIRE A
SIGNATURE GUARANTEE*:
- Transferring ownership of an account.
- Redemption check is more than $10,000.
- Redemption check is being mailed to an address other than the address of
record
- Redemption check is being mailed to an address which has been changed
within the last 30 days of the redemption request without a signature
guarantee.
*The Trust reserves the right to require a signature guarantee under certain
other circumstances.
TELEPHONE TRANSACTIONS
You may choose to initiate certain transactions by telephone subject to your
authorization. The Funds and their agents will not be responsible for any
losses resulting from unauthorized transactions when procedures designed to
verify the identity of the caller are followed. The Trust reserves the right to
terminate or suspend telephone transaction privileges at any time and without
notice. It may be difficult to reach the Funds by telephone during periods of
unusual market activity. If this happens, you may redeem your shares by mail as
described above.
To initiate telephone transactions, we require you to provide personal
identification information including:
- Portfolio name
- Account number
- Name and address exactly as registered on the account
- Other personal identification information
26
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
STONEBRIDGE FUNDS TRUST
370 17th Street, Suite 3100
Denver, Colorado 80202
(800) 639-3935
- --------------------------------------------------------------------------------
Stonebridge Funds Trust (the "Trust") is a no-load, open-end investment company,
commonly known as a mutual fund, consisting of two series--Stonebridge Growth
Fund (the "Growth Fund") and the Stonebridge Aggressive Growth Fund (the
"Aggressive Fund") (collectively "the Funds"). The rules and regulations of the
United States Securities and Exchange Commission (the "SEC") require all mutual
funds to furnish prospective investors certain information concerning the
activities of the companies being considered for investment. This information
is included in a Prospectus dated November 1, 1998 (the "Prospectus"), which may
be obtained without charge by writing or calling the Funds. This Statement of
Additional Information is intended to furnish investors with additional
information concerning the Funds.
The Prospectus and this Statement of Additional Information omit certain
information contained in the Trust's registration statement filed with the SEC.
Copies of the registration statement, including items omitted from the
Prospectus and this Statement of Additional Information, may be inspected at the
Public Reference Room of the SEC at 450 5th Street, N.W., Washington, D.C.
20549, and copies may be obtained from the SEC by paying the charges prescribed
under its rules and regulations. It is also available on the SEC's internet
website at http://www.sec.gov.
TABLE OF CONTENTS
PAGE
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . .2
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . .7
Brokerage Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Individual Retirement Accounts . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE TRUST'S PROSPECTUS, WHICH MAY BE OBTAINED BY WRITING
STONEBRIDGE FUNDS, 370 17TH STREET, SUITE 3100, DENVER, COLORADO 80202, (800)
639-3935.
NOVEMBER 1, 1998
1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Information concerning the Funds' fundamental investment objectives is set
forth in the Prospectus under the heading "Objectives and Investment Policies."
In order to achieve their investment objectives, the Funds invests in securities
of companies which appear to have good prospects for increased earnings and
dividends and they use certain other investment techniques in an effort to
enhance income and reduce market risks.
OPTIONS AND FUTURES TRANSACTIONS
The Funds intend to limit their transactions in options to writing covered
call options on stocks and stock indexes, purchasing put options on stocks and
on stock indexes, and closing out such options in closing transactions. The
Funds intend to limit their transactions in futures contracts (contracts to
purchase or sell an underlying instrument at a future date) to purchasing and
selling stock index and foreign currency futures contracts, and to purchases of
related options. Transactions in such options and futures contracts may afford
the Funds the opportunity to hedge against a decline in the value of securities
they own, may provide a means for the Funds to generate additional income on
their investments, or may provide opportunities for capital appreciation.
In purchasing futures contracts and related options the Funds will comply
with rules and interpretations of the Commodity Futures Trading Commission
("CFTC"), under which the Funds are excluded from regulation as a "commodity
pool operator." CFTC regulations require, among other things, that futures be
used (1) solely for "bona fide hedging" purposes, as defined in CFTC
regulations, and (2) other positions for the establishment of which the
aggregate initial margin and option premiums (less the amount by which such
options are "in the money") do not exceed 5% of a Fund's net assets (after
taking into account unrealized gains and unrealized losses on any contract it
has entered into). The extent to which a Fund may engage in futures
transactions may also be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company.
The above limitations on the Funds' investments in futures contracts and
options, and the Funds' policies regarding futures contracts and options
discussed elsewhere in this Statement of Additional Information, are not
fundamental policies and may be changed by the Board of Trustees without
shareholder approval as regulatory agencies permit. The Funds will not
modify the above limitations to increase the permissible futures and options
activities without supplying additional information in a current Prospectus
or Statement of Additional Information that has been distributed or made
available to the Funds' shareholders.
OPTIONS ON SECURITIES. The Funds may write covered call options on
securities they own to attempt to realize, through the receipt of premium
income, a greater return than would be realized on the securities alone. In
return for the premium, a Fund forfeits the right to any appreciation in the
value of the underlying security above the option's exercise price for the life
of the option (or until a closing transaction can be effected). The Fund also
gives up some control over when it may sell the underlying securities, and must
be prepared to deliver the underlying securities against payment of the option's
exercise price at any time during the life of the option. The Fund retains the
full risk of a decline in the price of the underlying security held to cover the
call for as long as its obligation as a writer continues, except to the extent
that the effect of such a decline may be offset in part by the premium received.
The principal purpose of writing a covered put option would be to realize
income in the form of the option premium, in return for which a Fund would
assume the risk of a decline in the price of the underlying security below the
option's exercise price less the premium received. The Fund's potential profit
from writing a put option would be limited to the premium received.
When a Fund has written an option, it may terminate its obligation by
effecting closing purchase transactions. This is accomplished by purchasing at
the current market price an option identical as to underlying instrument,
exercise price and expiration date to the option written by the Fund. The Fund
may not effect closing purchase transactions, however, after it has been
notified that the option it has written has been exercised. When a Fund has
purchased an option it may liquidate its position by exercising the option, or
by entering into a closing sale transaction by selling an option identical to
the option it has purchased. There is no guarantee that closing transactions
can be effected.
A Fund will realize a profit from a closing transaction if the price at
which the option is closed out is less than the premium received for writing the
option or more than the premium paid for purchasing the option. Similarly, the
Fund will realize a loss from closing transactions if the price at which the
option is closed out is more than the premium received or less than the premium
paid. Transaction costs for opening and closing options positions must be taken
into account in these calculations.
A Fund may purchase put options on securities it owns to attempt to protect
those securities against a decline in market value during the term of the
option. To the extent that the value of the securities declines, the Fund may
may exercise the option and sell the securities at the exercise price, and
thereby may partially or completely offset the depreciation of the securities.
If the price of the securities do not fall during the life of the options, the
Fund may lose all or a portion of the premium it paid for the put option, and
would lose the entire premium if the option were allowed to expire unexercised.
Such losses could, however, be offset entirely or in part if the value of the
securities owned should rise.
OPTIONS ON STOCK INDEXES. The Funds may write covered call options on
stock indexes to attempt to increase the return on their investments through the
receipt of premium income. The Funds will cover index calls by owning
securities whose price changes, in the opinion of the Funds' investment adviser,
are expected to be similar to those of the index. If the value of an index on
which a Fund has written a call option falls or remains the same, the Fund would
realize a profit in the form of the premium received (less
2
<PAGE>
transaction costs) that could offset all or a portion of any decline in the
value of the securities it owns. If the value of the index rises, however, the
Fund would realize a loss in its call option position, which would reduce the
benefit of any unrealized appreciation of the Fund's stock investments.
The principal reason for writing a covered put option on a stock index
would be to realize income in return for assuming the risk of a decline in the
index. To the extent that the price changes of securities owned by a Fund
correlates with changes in the value of the index, writing covered put options
on indexes would increase the Fund's losses in the event of a market decline,
although such losses would be offset in part by the premium received for writing
the option. The Fund would cover put options on indexes by segregating assets
equal to the option's exercise price, in the same manner as put options on
securities.
The Funds may purchase put options on stock indexes to hedge their
investments against declines in value. By purchasing a put option on a stock
index, a Fund will seek to offset a decline in the value of securities it owns
through appreciation of the put option. If the value of the Fund's investments
did not decline as anticipated, or if the value of the option did not increase,
the Fund's losses would be limited to the premium paid for the option. The
success of this strategy will largely depend on the accuracy of the correlation
between the changes in value of the index and the changes in value of the Fund's
security holdings.
STOCK INDEX AND FOREIGN CURRENCY FUTURES AND RELATED OPTIONS. The Funds
may purchase and sell stock index and foreign currency futures contracts (as
well as purchase related options) as hedges against changes resulting from
market conditions and exchange rates in the values of the domestic and foreign
securities held in the Funds or which they intend to purchase and where the
transactions are economically appropriate for the reduction of risks inherent in
the ongoing management of the Funds.
The Funds will sell stock index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise
result from a market decline. A Fund may do so either to hedge the value of
the portfolio as a whole, or to protect against declines, occurring prior to
sales of securities, in the value of the securities to be sold. Conversely, a
Fund will purchase stock index futures contracts in anticipation of purchases
of securities. In a substantial majority of these transactions, a Fund will
purchase such securities upon termination of the long futures positions, but
a long futures position may be terminated without a corresponding purchase of
securities.
In addition, the Funds may utilize stock index futures contracts in
anticipation of changes in the composition of they portfolio holdings. For
example, in the event that a Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish long futures positions based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the portfolio will decline prior to the time of
sale.
No price is paid or received by a Fund upon the purchase or sale of futures
contracts. Initially, the Fund will be required to deposit with a broker or in
a segregated account with the Fund's custodian an amount of cash or cash
equivalents, the value of which may vary but is generally equal to 10% or less
of the value of the contract. This amount is known as initial margin. The
nature of initial margin in futures transactions is different from that of
margin in securities transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contracts assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from a broker, will be made
on a daily basis as the price of the underlying instruments fluctuates making
the long and short positions in the futures contract more or less valuable, a
process known as marking-to-market. For example, when a Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, the position will have increased in value and the
Fund will be entitled to receive from the broker variation margin payments equal
to the increase in value. Conversely, where a Fund has purchased a futures
contract and the price of the futures contract has declined in response to
decreases in the underlying instruments, the positions would be less valuable
and the Fund would be required to make a variation margin payments to the
broker. At any time prior to expiration of the futures contracts, the Fund's
Adviser may elect to close the position by taking an opposite position, subject
to the availability of a secondary market, which will operate to terminate the
Fund's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes losses or gains.
Futures options possess many of the same characteristics as options on
securities. A futures option gives the holder the right, in return for the
premium paid, to assume a long positions (call) or short position (put) in a
futures contract at a specified exercise price at any time during the period of
the option. Upon exercise of a call option, the holder acquires a long position
in the futures contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true.
Futures positions may be closed out only on an exchange or board of trade
which provides a market for such futures. Although the Funds intend to purchase
futures which appear to have an active market, there is no assurance that a
liquid market will exist for any particular contract or at any particular time.
Thus, it may not be possible to close a futures position in anticipation of
adverse price movements.
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS. Because of the
imperfect correlation between movements in the price of a futures contract and
movements in the price of the securities or currency which are the subject of
the hedge, the price of the future
3
<PAGE>
may move more than or less than the price of the securities or currency being
hedged. If the price of the future moves less than the price of the securities
or currency which are the subject of the hedge, the hedge will not be fully
effective but, if the price of the securities or currency being hedged has moved
in an unfavorable direction, a Fund would be in a better position than if it had
not hedged at all. If the price of the securities or currency being hedged has
moved in a favorable direction, this advantage will be partially offset by the
loss on the future. If the price of the future moves more than the price of the
hedged securities or currency, the Fund will experience either a loss or gain of
the future which will not be completely offset by movements in the price of the
securities or currency which are the subject of the hedge. It is also possible
that, where a Fund has sold futures to hedge its portfolio against a decline in
the market, the market may advance and the value of securities or currency held
in the Fund may decline. If this occurred, the Fund would lose money on the
future and also experience a decline in value of its portfolio.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash or cash equivalents
in securities or options in an orderly fashion, it is possible that the market
may decline instead; if the Fund then concludes not to invest in securities or
options at that time because of concern as to possible further market decline or
for other reasons, the Fund will realize a loss on the futures contract that is
not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the securities or
currency being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. First, rather
than meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or currency movements by a Fund's investment adviser may
still not result in a successful hedging transaction over a short time frame.
Moreover, if the Fund's adviser is incorrect in such forecasts or interest rates
or other applicable factors, the Fund would be in a worse position than if it
had not hedged at all. In addition, the Fund's purchase and sale of options on
indexes is subject to the risks described above with respect to options on
securities.
In the event of the bankruptcy of a broker though which a Fund engages in
transactions in futures contracts or options, the Fund could experience delays
and losses in liquidating open positions purchased or sold through the broker,
and incur a loss of all or part of its margin deposits with the broker.
SHORT SALES AGAINST THE BOX
The Funds may from time to time make short sales of securities if at the
time of the short sale they own or have the right to acquire, at no additional
cost, an equal amount of the securities sold short. This investment technique
is known as a "short sale against the box." While the short position is
maintained, a Fund will collateralize its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve (presently 10% of the market value of the securities sold short). If a
Fund engages in a short sale the collateral account will be maintained by the
Fund's custodian or a duly qualified subcustodian. While the short sale is open
the Fund will maintain in a segregated custodial account an amount of securities
equal in kind and amount to the securities sold short or securities convertible
into or exchangeable for such equivalent securities at no additional cost. The
Funds' Adviser currently anticipates that no more than 25% of a Fund's total
assets would be invested in short sales against the box, but this limitation is
a nonfundamental policy which could be changed by the Board of Trustees of the
Trust.
A Fund may make a short sale against the box when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible into or exchangeable for such
security), or when the Fund wants to sell the security at a current attractive
price, but also wishes to defer recognition of gain or loss for federal income
tax purposes and for purposes of satisfying certain tests applicable to
regulated investment companies under the Internal Revenue Code. In such a case,
any future losses in the Fund's long position should be reduced by a gain in the
short position. The extent to which such gains or losses are reduced would
depend upon the amount of the security sold short relative to the amount the
Fund owns. There will be certain additional transaction costs associated with
short sales against the box, but the Funds will endeavor to offset these costs
with income from the investment of the cash proceeds of short sales.
BANK CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCE
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specified
merchandise, which are "accepted:" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by a Fund will be
dollar-denominated obligations of domestic banks or financial institutions which
at the time of purchase meet certain credit standards.
REPURCHASE AGREEMENTS
4
<PAGE>
Pursuant to a repurchase agreement, a Fund purchases securities and the
seller agrees to repurchase them from the Fund at a mutually agreed-upon time
and price. The period of maturity is usually overnight or a few days, although
it may extend over a number of months. The resale price is in excess of the
purchase price, reflecting an agreed-upon rate of return for the period of time
the Fund's money is invested in the security. The Funds' repurchase agreements
will be fully collateralized at all times in an amount at least equal to the
purchase price. The instruments held as collateral are valued daily. If the
seller defaults and the value of the collateral securing the repurchase
agreement declines, the Fund may incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
Fund may be delayed or limited. The Funds will only enter into repurchase
agreements with financial institutions and brokers and dealers which meet
certain creditworthiness and other criteria.
SHORT-TERM TREASURY SECURITIES
The Funds may invest in US Treasury bills, which mature in one year or
less, have fixed interest rates, and are guaranteed by the full faith and credit
of the U.S. Government.
CONVERTIBLE BONDS
The Aggressive Fund may invest in convertible bonds, which are fixed income
securities that may be converted at a stated price within a specified period of
time into a certain quantity of the common stock of the same or a different
issuer. Convertible bonds are senior to common stocks in an issuer's capital
structure, but are usually subordinated to similar non-convertible securities.
While providing a fixed income stream (generally higher in yield than the income
derivable from common stock but lower than that afforded by a similar
nonconvertible security), a convertible security also provides the investor the
opportunity, through its conversion feature, to participate in the capital
appreciation of the underlying common stock.
Like other debt securities, the value of a convertible bond tends to vary
inversely with the level of interest rates. However, to the extent that the
market price of the underlying common stock approaches or exceeds the conversion
price, the price of the convertible bond will be increasingly influenced by its
conversion value (the security's worth, at market value, if converted into the
underlying common stock).
PREFERRED STOCKS
The Aggressive Fund may invest in preferred stocks. Preferred stock,
unlike common stock, offers a stated dividend rate payable from a corporation's
earnings. Such preferred stock dividends may be cumulative or non-cumulative,
participating, or auction rate. If interest rates rise, the fixed dividend on
preferred stocks may be less attractive, causing the price of preferred stocks
to decline. Preferred stock may have mandatory sinking fund provisions, as well
as call/redemption provisions prior to maturity, a negative feature when
interest rates decline. Dividends on some preferred stock may be "cumulative,"
requiring all or a portion or prior unpaid dividends to be paid before dividends
are paid on the issuer's common stock. Preferred stock also generally has a
preference over common stock on the distribution of a corporation's assets in
the event of liquidation of the corporation, and may be "participating," which
means that it may be entitled to a dividend exceeding the stated dividend in
certain cases. The rights of preferred stocks on the distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with a corporation's debt securities.
INVESTMENT RESTRICTIONS
The following is a more detailed description of certain policies and
practices of the Funds which augments the summary of the Funds' investment
program which appears above and in the Prospectus under the heading "Objectives
and Investment Policies."
Certain investment limitations and restrictions cannot be changed without
the approval of a majority of the outstanding voting securities of the Funds.
These restrictions are as follows:
For both Funds:
(1) Neither Fund may invest an amount which exceeds 5% of the value of the
Fund's total assets in the securities of any one issuer. This
restriction does not apply to holdings of U.S. Government securities.
(2) Neither Fund may issue any senior securities.
(3) Neither Fund may purchase the securities of any issuer for the purpose
of exercising control of management and it may not acquire or own more
than 10% of any class of the securities of any company.
(4) Neither Fund may make short sales of securities or maintain a short
position unless at the time of the short sale the Fund owns or has the
right to acquire at no additional cost an equal amount of the
securities sold short.
(5) Neither Fund may borrow money except for temporary emergency purposes
and then not in excess of 10% of total
5
<PAGE>
net assets for the Growth Fund and 5% of total net assets for the
Aggressive Fund.
(6) Neither Fund may underwrite securities, buy or sell real estate or
commodities or commodity contracts, or make loans to individuals,
except that the Funds may invest in futures contracts and options as
described in "Futures, Stock Index and Options Transactions."
(7) Neither Fund may invest in the securities of other investment
companies if immediately after such investment the Fund will own (a)
securities issued by an investment company having an aggregate value
in excess of 5% of the value of the total assets of the Fund, or (b)
securities issued by all investment companies having an aggregate
value in excess of 10% of the value of the total assets of the Fund,
except to the extent permitted by the Investment Company Act of 1940
and any applicable rules or exemptive orders issued thereunder.
(8) Neither Fund may invest in any security if information is not
available with respect to the history, management, assets, owners and
income of the issuer of such security, and neither Fund may make any
investment which would subject the Fund to unlimited liability.
(9) Neither Fund may purchase any securities on margin except for
short-term credits as are necessary for the clearance of transactions;
provided, however, that the Funds may make initial and variation
margin payments in connection with purchases or sales of options or
futures contracts.
Although the Funds are not prohibited from purchases of restricted
securities, the Funds have never held such securities in their portfolios and do
not presently intend to purchase restricted securities.
For the Growth Fund Only (cannot by changed without majority of shareholder
votes):
(1) The Growth Fund may not lend any money to any person (for this purpose
the purchase of a portion of an issue of publicly distributed debt
securities for the investment purposes is not considered a loan).
(2) The Growth Fund may not engage in activity which involves promotion or
business management by the Fund.
(3) The Growth Fund may not buy or sell real estate mortgage loans.
The Board of Trustees has adopted a policy that the Growth Fund will not
invest in oil, gas and other mineral leases and, in addition to the restrictions
on real estate investments contained above, the Growth Fund will not purchase
any real estate limited partnership interest. In addition, the Growth Fund will
not pledge, mortgage or hypothecate assets of the Growth Fund taken at market
value to an extent greater than 15% of the gross assets of the Growth Fund taken
at cost. The Growth Fund will not invest in securities of companies which have
a record of less than three years continuous operations if such purchase at the
time thereof would cause more than 5% of the total assets of the Growth Fund to
be invested in securities of such companies.
MANAGEMENT OF THE TRUST
Overall operations of the Trust are conducted by its officers subject to
the supervision of the Board of Trustees. The officers and trustees of the
Trust, their addresses and their principal occupation during the past 5 years
are:
JOHN G. AYER (age 75) - Trustee*
Executive Vice President and Director of Stonebridge Capital Management,
Incorporated; Director, Taylor & Turner Assoc., Ltd., (a venture capital
organization); 1801 Century Park East, Suite 1800, Los Angeles, California
90067. Retired President of Stonebridge Aggressive Growth Fund, Inc. (1997
- -July 1998); Director, Stonebridge Growth Fund, Inc. (1997 to October 1998) and
Stonebridge Aggressive Growth Fund, Inc. (1982 - October 1998).
RICHARD C. BARRETT (age 56) - Chairman of the Board of Trustees, and President*
President and Director, Stonebridge Capital Management, Incorporated; 1801
Century Park East, Suite 1800, Los Angeles, California 90067; Director,
Stonebridge Growth Fund, Inc. and Stonebridge Aggressive Growth Fund, Inc. (1982
- - October, 1998).
SELVYN B. BLEIFER, M.D. (age 69) - Trustee
Physician, Cardiovascular Medical Group, 414 North Camden Drive, Beverly
Hills, California 90212; Director, Stonebridge Growth Fund, Inc. and Stonebridge
Aggressive Growth Fund, Inc. (1985 - October, 1998).
MARVIN FREEDMAN (age 73) - Trustee
Retired Founding Partner, Freedman, Broder, & Company Accountancy
Corporation, Certified Public Accountants, 2501 Colorado Avenue, Suite 350,
Santa Monica, California 90404; Director, Stonebridge Growth Fund, Inc. (1973
to October 1998) and Stonebridge Aggressive Growth Fund, Inc. (1995 - October,
1998).
6
<PAGE>
CHARLES F. HAAS (age 84) - Trustee
Retired motion picture and television director; Director, Oakwood School,
12626 Hortense Street, Studio City, California, 91604; Director, Stonebridge
Growth Fund, Inc. and Stonebridge Aggressive Growth Fund, Inc. (1981 - October,
1998).
WILLIAM H. TAYLOR (age 59) - Trustee
General Partner, Taylor & Company (a venture capital organization); General
Partner, Taylor and Turner Assoc., Ltd. (a venture capital organization);
Director, Oncor, Inc., (a biotechnology company); Director, AMT Ventures (a
materials venture fund); Director, I.C.C., Inc. (an infrared imaging company);
Director, T.P.L., Inc. ( an advanced materials company), 18730 Canyon Road,
Sonoma California 91604; Director, Stonebridge Growth Fund, Inc. and Stonebridge
Aggressive Growth Fund, Inc. (1983 - October, 1998).
CHARLES E. WOODHOUSE (age 34) - Trustee and Vice President*
Executive Vice President, Managing Director and Director of Research of
Stonebridge Capital Management, Incorporated, 1801 Century Park East, Suite
1800, Los Angeles, California, 90067; President, Stonebridge Aggressive Growth
Fund, Inc. (July 1998 - October 1998).
CRAIG B. BURGER (age 41) - Trustee and Vice President*
Senior Vice President and Director, Stonebridge Capital Management,
Incorporated, 1801 Century Park East, Suite 1800, Los Angeles, California 90067.
DEBRA L. NEWMAN (age 42) - Trustee, Vice President and Treasurer*
Vice President, Chief Financial Officer, Secretary and Director,
Stonebridge Capital Management, Incorporated, 1801 Century Park East, Suite
1800, Los Angeles, California 90067; Treasurer, Stonebridge Aggressive Growth
Fund, Inc. (February, 1980 - October 1998); President, Stonebridge Growth Fund,
Inc. (April, 1985 - October 1998).
CHAD S. CHRISTENSEN (age 28) - Vice President
Vice President and Director of Mutual Fund Operations; ALPS Mutual Funds
Services, Inc.; Assistant Treasurer, Westcore Trust, 370 17th Street, Suite
3100, Denver, Colorado 80202.
JAMES V. HYATT (age 47) - Secretary
General Counsel, ALPS Mutual Funds Services, Inc., Secretary, First Funds
Trust, and Assistant Secretary, Financial Investors Trust; Director, the Dairy
(a non-profit community arts center); 370 17th Street, Suite 3100, Denver,
Colorado 80202.
- -------------------
* "Interested person" of the Trust as defined by the Investment Company Act
of 1940, as amended.
As of September 30, 1998, the directors and officers of the Fund, as a
group, owned beneficially less than 1% of each Fund's outstanding shares.
None of the officers of the Trust received any compensation from the
predecessors of the Trust for his or her services during the fiscal years
ended November 30, 1997. Each trustee who is not an "interested person" of
the Trust is entitled to receive from the Trust $1,500 for each meeting of
the Board of Trustee. The following table sets forth more detailed
compensation information for the independent Trustees of the Trust from the
predecessors of the Growth Fund and the Aggressive Fund during the fiscal
years ended October 31, 1997 and November 30, 1997, respectively:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE PENSION OR TOTAL
COMPENSATION FROM COMPENSATION FROM RETIREMENT COMPENSATION
DIRECTOR AGGRESSIVE FUND GROWTH FUND BENEFITS PAID TO TRUSTEES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selvyn B. Bleifer, MD $350 $2,350 $0 $2,700
Marvin Freedman $350 $2,350 $0 $2,700
Charles F. Haas $350 $2,350 $0 $2,700
William H. Taylor, II $150 $ 0 $0 $ 150
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER. The Fund's investment adviser is Stonebridge Capital
Management, Incorporated, 1801 Century Park East, Los Angeles, California 90067
(the "Adviser"), which provides investment advisory services to the Funds
pursuant to investment advisory agreements (the "Agreements") approved by the
Board of Trustees on August 25, 1998. The Adviser is engaged in the business of
providing investment advice to individual and institutional clients, and managed
assets aggregating $493 million as of September 30, 1998. It currently has 13
employees and is owned by seven of its employees. The Adviser's directors and
executive officers are John G. Ayer, Richard C. Barrett, Craig B. Burger, Debra
L. Newman, Karen H. Parris, Timothy G. Walt and Charles E. Woodhouse.
Personnel of the Adviser may invest in securities for their own accounts
pursuant to a Code of Ethics that sets forth all employees' fiduciary
responsibilities regarding the Trust, establishes procedures for personal
investing, and restricts certain transactions. In addition, restrictions on the
timing of personal investing in relation to trades by the Funds and on
short-term trading have been adopted.
7
<PAGE>
Each Agreement provides that the Adviser will not be liable for any error
of judgment or loss suffered by the Funds, except for liability resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
under each Agreement. The Trust has agreed to indemnify the Adviser against
liabilities, costs and expenses that the Adviser may incur in connection with
any action, suit, investigation or other proceeding arising out of or otherwise
based on any action actually or allegedly taken or omitted to be taken by the
Adviser in connection with the performance of its duties or obligations under
the Agreements. The Adviser is not entitled to indemnification with respect to
any liability to the Trust or shareholders of the Funds by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
of its reckless disregard of its duties and obligations under the Agreements.
The Adviser has voluntarily agreed to waive its fee or reimburse the Funds
to ensure that the annual expense of the Growth Fund and of the Aggressive
Growth Fund annually do not exceed 1.50% and 2.90% of their average daily net
assets, respectively. The Adviser has agreed to continue this voluntary waiver
or reimbursement through November 30, 2002 and October 31, 2002 for the Growth
Fund and the Aggressive Growth Fund, respectively. In the event that the
expense ratio for a Fund falls below the applicable level, the Trust has agreed
to reimburse the Adviser for management fees that were waived or reimbursed in
prior periods, so long as such reimbursement does not cause the expenses of the
Fund to exceed the applicable level. The Adviser has agreed to forego any
waived or reimbursed fee that have not been recovered within three years after
the waiver or reimbursement.
ADMINISTRATOR. The Funds' Administrator is ALPS Mutual Funds Services,
Inc., 370 17th Street, Suite 3100, Denver, Colorado 80202. Pursuant to its
Administration Agreement with the Trust, the Administrator is not liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the matters to which the Agreement relates, except for losses
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under the Agreement. The Administrator received $60,000
from each Fund for administration services for the year ended July 31, 1998.
DISTRIBUTOR. The Funds' Distributor is ALPS Mutual Funds Services, Inc.,
370 17th Street, Suite 3100, Denver, Colorado 80202. Pursuant to its General
Distribution Agreement with the Trust, the Distributor has agreed to use all
reasonable efforts, consistent with its other business, to secure purchasers for
shares of the Funds, but is not obligated to sell any specified number of
shares. The General Distribution Agreement contains provisions with respect to
renewal and termination similar to those in the Investment Advisory Agreement.
Pursuant to the General Distribution Agreement, the Trust has agreed to
indemnify the Distributor to the extent permitted by applicable law against
certain liabilities under the Securities Act of 1933 and other applicable laws.
CUSTODIAN. The Funds' Custodian is Fifth Third Bank, Fifth Third Center,
Cincinnati, Ohio 45263. It receives and deposits all cash and receives and
collects income from the Fund's investments. These institutions also receive
and deliver securities bought or sold by the Funds. The Custodian has no part
in the management or investment decisions of the Funds. The Custodian is
entitled to receive compensation based on the market value of all assets of the
Trust in the aggregate, plus certain transaction based charges.
TRANSFER AGENT. The Funds' transfer agent and dividend disbursing agent
is National Financial Data Services, 330 West 9th Street, Kansas City,
Missouri 64105. As transfer agent, National Financial Data Services maintains
the Funds' records for the shareholders who purchase shares. It accepts,
confirms and processes payments for purchase and redemptions, and disburses
and reinvests dividends and capital gains distributions, if any, made by the
Funds to these shareholders. The fee paid to the transfer agent is based on a
minimum fee, the number of open accounts and certain transaction based
charges.
INDEPENDENT ACCOUNTANTS. Hein + Associates LLP, Denver Colorado (the
"Auditors") serve as independent accountants to the Trust. The Auditors conduct
the audit of the Funds' annual financial statements and prepare the Trust's tax
returns. The Auditors have no part in the management or investment decisions of
the Funds. Their annual fee is approximately $26,000 per year.
BROKERAGE TRANSACTIONS
Decisions to buy and sell securities for the Funds, assignment of their
portfolio business and negotiation of their commission rates are made by the
Adviser. It is the Funds' policy that the Adviser shall seek to obtain both
quality research and "best execution" of purchase and sales transactions, and
that the Adviser shall seek to negotiate the brokerage commissions to provide
fair, competitive compensation for the brokers' services, giving consideration
to the statistical and research services provided as well as the brokerage
execution services. Statistical and research material furnished to the Adviser
may be useful to the Adviser in providing services to clients other than the
Funds. Similarly, such material furnished to the Adviser by brokers through
which other clients of the Adviser trade may be useful in providing services to
the Funds. Subject to periodic review by the Board of Trustees, the Adviser is
authorized to pay higher commissions to brokerage firms that provide it with
investment and research information if the Adviser determines such commissions
are reasonable in relation to the overall services provided. None of the
broker/dealer firms with which the Funds conduct business is engaged in sales of
shares of the Funds and none is affiliated with either the Funds or the Adviser.
Although investment decisions for the Funds are made independently from
those of the other accounts managed by the Adviser, investments of the kind made
by the Funds may also be made by other such accounts. When a purchase or sale
of the same security is made at substantially the same time on behalf of a Fund
and one or more other accounts managed by the Adviser, available investments are
allocated in the discretion of the Adviser by such means as, in its judgment,
result in fair treatment. The Adviser
8
<PAGE>
aggregates orders for purchases and sales of securities of the same issuer on
the same day among the Funds and its other managed accounts, and the price paid
to or received by the Funds and those accounts is the average obtained in those
orders. In some cases, such aggregation and allocation procedures may affect
adversely the price paid or received by the Funds or the size of the position
purchased or sold by the Funds.
When a Fund purchases or sells a security which is not listed on a national
securities exchange but which is traded in the over-the-counter market, the
transaction generally takes place directly with a principal market maker, except
in those circumstances where, in the opinion of the Adviser, better prices and
executions will be achieved through the use of other broker-dealers. The
Adviser does not receive any benefit directly or indirectly arising from these
transactions.
The following provides information regarding the brokerage transactions of
the Funds' predecessors during their 1997, 1996, and 1995 fiscal years.
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO TOTAL BROKERAGE
TURNOVER RATE COMMISSIONS PAID
------------- ----------------
GROWTH FUND AGGRESSIVE FUND GROWTH FUND AGGRESSIVE FUND
OCTOBER 31, NOVEMBER 30, OCTOBER 31, NOVEMBER 30,
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
1997 41% 88% $85,997 $ 11,746
1996 45% 108% $63,806 $ 12,402
1995 38% 60% $67,890 $ 8,995
</TABLE>
The anticipated annual portfolio turnover will normally be in the range of
25% to 75% for the Growth Fund and 25% to 100% for the Aggressive Fund.
Portfolio turnover is a function of market shifts and relative valuation of
individual securities and market sectors. The Funds' Adviser attempts to keep
the Funds invested in those securities that have the potential to meet the
Funds' objectives and that represent the best relative value.
The predecessors of the Funds did not acquire securities of any brokers or
dealers, or the parents thereof, during the years ended November 30, 1997 and
October 31, 1997, respectively.
REDEMPTIONS
Each Fund will redeem shares solely in cash up to the lesser of $250,000 or
1% of its net assets during any 90-day period for any one shareholder. Each
Fund reserves the right to pay any redemption price exceeding this amount in
whole or in part by a distribution in kind of securities held by the Fund in
lieu of cash. It is highly unlikely that shares would ever be redeemed in kind.
If shares are redeemed in kind, however, the redeeming shareholder would incur
transaction costs upon the disposition of the securities received in the
distribution.
PRICING
Each Fund's public offering price per share, which is its net asset value
per share, is determined once daily as of the close of the New York Stock
Exchange ("NYSE") on each day it is open for trading. This price is applicable
to all orders to buy or sell the Fund's shares received prior to the close of
trading on the NYSE each day the NYSE is open. Orders received after such time
are held until the next day on which the public offering price is determined.
Securities listed or traded on a registered securities exchange are valued
at the last sale price on the day of the computation or, if there is not a sale
on that day, the last reported bid price. Where market quotations of
over-the-counter stocks or other securities are readily available, the mean
between the bid and asked price is used; however, for dates on which the last
sale price is available from NASDAQ, or other source of equivalent reliability,
the last sale price for such date is used. Short-term debt securities with
maturities of less than 60 days are valued at amortized cost, which generally
equals market value.
Trading in securities on foreign securities exchanges and over-the-counter
markets is normally completed well before the close of business day in New York.
In addition, foreign securities trading may not take place on all business days
in New York, and may occur in various foreign markets on days which are not
business days in New York and on which net asset value is not calculated. The
calculation of net asset value may not take place contemporaneously with the
determination of the prices of portfolio securities used in such calculation.
Events affecting the values of portfolio securities that occur between the time
their prices are determined and the close of the New York Stock Exchange will
not be reflected in the calculation of net asset value unless the Board of
Trustees deems that the particular event would materially affect net asset
value, in which case an adjustment will be made. Assets or liabilities
initially expressed in terms of foreign currencies are translated prior to the
next determination of the net asset value into U.S. dollars at the spot exchange
rates at 1:00 p.m. Eastern Time or at such other rates as the Adviser may
determine to be appropriate in computing net asset value.
The value of any other securities for which no market quotations are
available and other assets will be determined at fair value in good faith by or
pursuant to the policies adopted by the Board of Trustees.
9
<PAGE>
The net asset value per share of a Fund is determined by dividing the total
market value of each of the Fund's portfolio securities and other assets, less
all liabilities, by the total numbers of the Fund's shares outstanding.
TAXATION
Each Fund intends to qualify annually and has elected to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify as a regulated investment company, the Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies ("Qualifying Income Test"); (b) diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the Fund's total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies) (the "Diversification
Test"); and (c) distribute at least 90% of its investment company taxable income
(which includes dividends, interest and net short-term capital gains in excess
of any net long-term capital losses) each taxable year.
As regulated investment companies, a Fund will not be subject to U.S.
federal income tax on its investment company taxable income and net capital
gains (any net long-term capital gains in excess of the sum of net short-term
capital losses and capital loss carryovers from the prior eight years)
designated by the Fund as capital gain dividends, if any, that it distributes to
shareholders. Each Fund intends to distribute to their shareholders
substantially all of its investment company taxable income monthly and any net
capital gains annually. Investment company taxable income or net capital gains
not distributed by a Fund on a timely basis in accordance with a calendar year
distribution requirement may be subject to a nondeductible 4% excise tax. The
avoid the tax, the Fund must distribute during each calendar year an amount at
least equal to the sum of (1) 98% of its ordinary income (with adjustments) for
the calendar year and foreign currency gains or losses for the twelve month
period ending on November 30 of the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (and adjusted for certain ordinary
losses) for the twelve month period ending on November 30 of the calendar year,
and (3) all ordinary income and capital gains for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of the calendar year, if it is declared by the Fund in October,
November, or December of that year to shareholders of record on a date in such a
month and actually paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders (other than those not subject to
federal income tax) in the calendar year in which the distributions are
received. To avoid application of the excise tax, the Funds intend to make
their distributions in accordance with the calendar year distribution
requirement.
DISTRIBUTIONS. Dividends paid out of a Fund's investment company taxable
income will be taxable to U.S. shareholders as ordinary income. Distributions
received by tax-exempt shareholders will not be subject to federal income tax to
the extent permitted under the applicable tax exemption.
Dividends paid by the Funds are not expected to qualify for the deduction
for dividends received by corporations. Distributions of net capital gains, if
any, are taxable as long-term capital gains, regardless of how long shareholders
have held a Fund's shares and are not eligible for the dividends received
deduction. The tax treatment of dividends and distributions will be the same
whether a shareholder reinvests them in additional shares or elects to receive
them in cash.
SALES OF SHARES. Upon disposition of shares of a Fund (whether by
redemption, sale or exchange), shareholders will realize gains or losses. Such
gains or losses will be capital gains or losses if the shares are capital assets
in the shareholders' hands, and will be long-term or short-term generally
depending upon the shareholders' holding periods for the shares. Any loss
realized on a disposition will be disallowed by "wash sale" rules to the extent
the shares disposed of are replaced within a period of 61 days beginning 30 days
before and ending 30 days after the disposition. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of shares held by the shareholder for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of capital gain dividends received by the shareholder with
respect to such shares.
BACKUP WITHHOLDING. The Funds may be required to withhold for U.S. federal
income taxes 31% of all taxable distributions payable to shareholders who fail
to provide the Funds with their correct taxpayer identification number or to
make required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
certain other shareholders specified in the Code generally are exempt from such
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal tax liability.
FOREIGN INVESTMENTS. Income received by the Funds from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the U.S. may reduce or
eliminate such taxes. In addition, the Adviser intends to manage the Funds with
the intention of minimizing foreign taxation in cases where it is deemed prudent
to do so. If more than 50% of the value of a Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible to elect to "pass-through" to the Fund's shareholders the
amount of foreign income and similar taxes paid by the Fund. If this election
is made, a shareholder generally subject to tax will be required to include in
gross
10
<PAGE>
income (in addition to taxable dividends actually received) his pro rata share
of the foreign income taxes paid by the Fund, and may be entitled either to
deduct (as an itemized deduction) his or her pro rata share of foreign taxes in
computing his taxable income or to use it (subject to limitations) as a foreign
tax credit against his or her U.S. federal income tax liability. No deduction
for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Shareholders will be notified in writing within 60 days after the
close of each Fund's taxable year whether the foreign taxes paid by the Fund
will "pass-through" for that year. Absent a Fund making the election to "pass
through" the foreign source income and foreign taxes, none of the distributions
may be treated as foreign source income for purposes of the foreign tax credit
calculations.
Investment income received from sources within foreign countries may be
subject to foreign income taxes. The U.S. has entered into tax treaties with
many foreign countries which entitle certain investors to a reduced rate of tax
or to certain exemptions from tax. The Funds will operate so as to qualify for
such reduced tax rates or tax exemptions whenever practicable. A Fund may
qualify for and make an election permitted under section 853 of the Code so that
shareholders will be able to claim a credit or deduction on its Federal income
tax returns for, and will be required to treat as part of the amounts
distributed to them, their pro rata portion of the income taxes paid by the Fund
to foreign countries (which taxes relate primarily to investment income). The
shareholders of the Fund may claim a credit by reason of the Fund's election
subject to certain limitations imposed by Section 904 of the Code. However, no
deduction for foreign taxes may be claimed under the Code by individual
shareholders who do not elect to itemize deductions on their Federal income tax
returns, although such a shareholder may claim a credit for foreign taxes and in
any event will be treated as having taxable income in the amount of the
shareholder's pro rata share of foreign taxes paid by the Fund. Although each
Fund intends to meet the requirements of the Code to "pass through" such taxes,
there can be no assurance that the Funds will be able to do so.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election
is made, the source of a Fund's income will flow through to the shareholders of
the Fund. With respect to such election, gains from the sale of securities will
be treated as derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income, and to certain
other types of income. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the Funds.
The foreign tax credit is modified for purposes of the Federal alternative
minimum tax and can be used to offset only 90% of the alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income.
OTHER TAXES. Distributions also may be subject to additional state, local
and foreign taxes, depending on each shareholder's particular situation.
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Funds.
YEAR 2000
The services provided by the Trust's investment adviser, administrator,
principal underwriter, transfer agent and other service providers depend on the
proper functioning of their computer systems. Certain of these systems will
require updating or replacement prior to the year 2000 to avoid errors when
storing dates and making date-related calculations. The Trust understands that
these firms (and their important vendors and business partners) are taking steps
reasonably designed to prepare their computer systems for the 21st century.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds.
PERFORMANCE INFORMATION
Each Fund may from time to time advertise total returns, compare the Fund's
performance to various indices, and publish rankings of the Fund prepared by
various ranking services. Any performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of its portfolio, and the market conditions during the given time
period, and should not be considered to be representative of what may be
achieved in the future.
The total return for a Fund are computed by assuming a hypothetical initial
payments of $1,000. It is assumed that all investments are made at net asset
value (as opposed to market price) and that all of the dividends and
distributions by the Fund over the relevant time periods are invested at net
asset value. It is then assumed that, at the end of each period, the entire
amount is redeemed without regard to any redemption fees or costs. The average
annual total returns are then determined by calculating the annual rate required
for the initial payment to grow to the amount which would have been received
upon redemption. Total returns do not take into account any federal or state
income taxes.
Total return is computed according to the following formula:
n
P(1 + T) = ERV
Where P = a hypothetical initial payment of $1,000.
T= average annual total return.
n= number of years.
ERV= ending redeemable value at the end of the period (or
fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the period.
11
<PAGE>
TOTAL RETURNS HAVE BEEN AS FOLLOWS:
<TABLE>
<CAPTION>
GROWTH FUND AGGRESSIVE FUND
(YEAR ENDED NOVEMBER 30) (YEAR ENDED OCTOBER 31)
----------------------- ----------------------
<S> <C> <C>
1998(1) 8.17% 7.20%
Last 5 years' 14.13% 16.86%
Last 10 years' 12.84% 11.63%
</TABLE>
(1)For the period ending May 31, 1998 and April 30, 1998, respectively
Performance information for a Fund may be compared to various unmanaged
indices, such as S&P 500, Russell 2000, Russell 3000 and indices prepared by
Lipper Analytical Services. Unmanaged indices (i.e., other than Lipper)
generally do not reflect deductions for administrative and management costs and
expenses.
Performance rankings are prepared by a number of mutual fund ranking
entities that are independent of the Trust and its affiliates. These entities
categorize and rank funds by various criteria, including fund type, performance
over a given period of years, total return, variations in sales charges and
risk/reward considerations.
INDIVIDUAL RETIREMENT ACCOUNTS
The Funds have available a plan (the "IRA") for use by individuals with
compensation for services rendered (including earned income from
self-employment) who wish to use shares of the Funds as a funding medium for
individual retirement saving.
TRADITIONAL IRA. For a "Traditional IRA", except for rollover
contributions, an individual who has attained, or will attain, age 70 1/2 before
the end of the taxable year may only contribute to an IRA for his or her
nonworking spouse under age 70 1/2. Distributions of an individual's IRA
assets (and earnings thereon) before the individual attains age 59 1/2 will
(with certain exceptions) result in an additional 10% tax on the amount included
in the individual's gross income. Earnings on amounts contributed to the IRA
are not taxed until distributed.
ROTH IRA. For a "Roth IRA", an individual may contribute to an IRA for his
or her nonworking spouse. Distributions of an individual's IRA assets (and
earnings thereon) after the age of 59 1/2 and with certain other conditions met
will not be included in the individual's gross income.
The foregoing brief descriptions are not complete or definitive
explanations of the various types of Individual Retirement Accounts. Any person
who wishes to establish a retirement plan account may do so by contacting the
Funds at 1-800-639-3935. The complete Plan documents and applications will be
provided to existing or prospective shareholders upon request, without
obligation. The Funds recommend that investors consult with their attorneys or
tax advisors.
FINANCIAL STATEMENTS
The financial statements in the 1997 Annual Reports and the 1998
Semi-Annual Reports of the predecessors of the Funds are incorporated in this
Statement of Additional Information by reference. The financial statements in
the Annual Reports have been audited by the Funds' independent accountants to
each predecessor, Hein + Associates LLP, whose report thereon appears in the
Annual Reports, and have been incorporated herein in reliance upon such reports
given upon their authority as experts in accounting and auditing. The financial
statements in the Semi-Annual Reports have been produced by the Trust and are
unaudited. Additional copies of the Annual and Semi-Annual Reports may be
obtained at no charge by writing or telephoning the Funds at the address or
number on the front page of this Statement of Additional Information.
12
<PAGE>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
-- (a) (1) Financial Statements included in Part A of this
Registration Statement:
Financial Highlights
-- (2) Financial Statements incorporated by reference in
Part B of this Registration Statement:
(i) The financial statements and accompanying
notes which appear in the Semi-Annual Reports of
Stonebridge Growth Fund, Inc. and Stonebridge
Aggressive Growth Fund, Inc. for the periods dated
April 30, 1998 and May 31, 1998, respectively.
(ii) The financial statements and accompanying
notes and reports of independent auditors of
Stonebridge Growth Fund, Inc. and Stonebridge
Aggressive Growth Fund, Inc. for the years ended
October 31, 1997 and November 30, 1997,
respectively.
(b) EXHIBITS
-- (1) (a) Certificate of Trust of Registrant.
- (1) (b) Declaration of Trust of Registrant, as amended.
-- (2) (a) By-Laws of Registrant.
(3) None.
(4) None.
-- (5) (a) Form of Investment Advisory Agreement between
Registrant and Stonebridge Capital Management,
Incorporated with respect to the Stonebridge
Growth Fund.
-- (5) (b) Form of Investment Advisory Agreement between
Registrant and Stonebridge Capital Management,
Incorporated with respect to the Stonebridge
Aggressive Growth Fund.
-- (6) (a) Form of Distribution Agreement between
Registrant and ALPS Mutual Funds Services, Inc.
<PAGE>
-- (b) Form of Administration Agreement between
Registrant and ALPS Mutual Funds Services, Inc.
(7) None.
- (8) Form of Custody Agreement between Registrant
and The Fifth Third Bank.
-- (9) (a) Form of Transfer Agency and Service Agreement
between Registrant and ALPS Mutual Funds
Services, Inc.
- (9) (b) Form of Sub-Transfer Agency Agreement between
ALPS Mutual Funds Services, Inc. and State Street
Bank and Trust Company.
- (9) (c) Form of Fund Accounting and Services Agreement
between Registrant and The Fifth Third Bank.
-- (10) Opinion and Consent of Paul, Hastings, Janofsky
& Walker LLP.
-- (11) Consent of Hein + Associates LLP.
(12) None.
(13) None.
(14) None.
(15) None.
(16) None.
-- (27) Financial Data Schedules.
(18) None.
OTHER EXHIBITS
-- (19) (a) Power of Attorney.
-- (19) (b) Materials related to Individual Retirement
Account Services.
- Filed herewith.
-- Filed by Post Effective Amendment No. 60 on August 18, 1998
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
As of August 10, 1998:
Title of Class: Number of Record Holders:
<S> <C>
Stonebridge Growth Fund, Inc. 6,129
(predecessor to Stonebridge Growth Fund)
Stonebridge Aggressive Growth Fund, Inc. 297
(predecessor to Stonebridge Aggressive
Growth Fund)
</TABLE>
Item 27. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment Company Act of
1940 (the "1940 Act") and pursuant to Article V of the Registrant's Trust
Instrument (Exhibit 1 to the Registration Statement), Section 8 of each
Investment Advisory Agreement (Exhibits 5(a) and 5(b) to the Registration
Statement) and Section 15 of the Distribution Agreement (Exhibit 6(a) to this
Registration Statement), officers, trustees, employees and agents of the
Registrant will not be liable to the Registrant, any shareholder, officer,
trustee, employee, agent or other person for any action or failure to act,
except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities 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
Securities Act and will be governed by the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers
and trustees against liabilities, and certain costs of defending claims against
such officers and trustees, to the
<PAGE>
extent such officers and trustees are not found to have committed conduct
constituting willful misfeasance, bad faith, gross negligence or reckless
disregard in the performance of their duties. The insurance policy also insures
the Registrant against the cost of indemnification payments to officers under
certain circumstances.
Section 8 of each Investment Advisory Contract and Section 15 of the
Distribution Contract limit the liability of Stonebridge Capital Management,
Inc. and ALPS Mutual Funds Services, Inc., respectively, to liabilities arising
from willful misfeasance, bad faith or gross negligence in the performance of
their respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, By-Laws, Investment
Advisory Contracts and Distribution Contract in a manner consistent with Release
No. 11330 of the Securities and Exchange Commission under the 1940 Act so long
as the interpretations of Section 17(h) and 17(i) of such Act remain in effect
and are consistently applied.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to "Management of the Trust" in the Prospectus
forming Part A, and "The Management of the Trust" in the Statement of Additional
Information forming Part B, of this Registration Statement.
The list required by this Item 28 of officers and directors of
Stonebridge Capital Management, Incorporated, together with information as to
any other business, profession, vocation or employment of a substantial nature
engaged in by those officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Stonebridge
Capital Management, Inc. pursuant to the Investment Advisers Act of 1940, as
amended (SEC File No. 801-5363).
<PAGE>
Item 29. PRINCIPAL UNDERWRITER
(a) ALPS Mutual Funds Services, Inc. acts as Distributor/Underwriter
for various other unrelated registered investment companies.
(b) Officers and Directors
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Registrant Positions and Offices with Underwriter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Robert Alexander None Chairman and Chief Executive Officer
Arthur J. L. Lucey None President and Secretary
Thomas A. Carter None Vice President and Chief Financial Officer
Chad Christensen Vice President Vice President
Edmund J. Burke None Executive Vice President
James V. Hyatt Secretary General Counsel
Jeremy O. May None Vice President
William N. Paston None Vice President
John S. Hannon, Jr. None Director
Rick A. Pederson None Director
Chris Woessner None Director
</TABLE>
- ---------------------
* All addresses are 370 Seventeenth Street, Suite 3100, Denver, Colorado
80202.
(c) Not applicable.
<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder are
maintained at the offices of ALPS Mutual Funds Services, Inc., National
Financial Data Services, Fifth Third Bank and Stonebridge Capital Management,
Incorporated.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS.
(a) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the removal of a trustee if requested to
do so by the holders of at least 10% of the Registrant's
outstanding shares.
(b) Registrant undertakes to provide the support to shareholders
specified in Section 16(c) of the 1940 Act as though that section
applied to the Registrant.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual
report upon request and without a charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Los Angeles, and State of California on the 14th
day of August, 1998.
STONEBRIDGE FUNDS TRUST.
By /s/ RICHARD C. BARRETT
-------------------------
Richard C. Barrett
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
(1) Principal Executive Officer:
/s/ RICHARD C. BARRETT
------------------------------ Chief Executive Officer,
Richard C. Barrett President and Trustee August 14, 1998
(2) Principal Financial and Accounting Officer
/s/ DEBRA L. NEWMAN
------------------------------ Vice President, Treasurer
Debra Newman and Trustee August 14, 1998
(3) Trustees
* MARVIN FREEDMAN Trustee August 14, 1998
* RICHARD C. BARRETT Trustee August 14, 1998
* WILLIAM H. TAYLOR II Trustee August 14, 1998
* CHARLES F. HAAS Trustee August 14, 1998
* CHARLES E. WOODHOUSE Trustee August 14, 1998
* JOHN G. AYER Trustee August 14, 1998
* SELVYN B. BLEIFER Trustee August 14, 1998
* CRAIG B. BURGER Trustee August 14, 1998
*By /s/ DEBRA L. NEWMAN
---------------------------
Debra L. Newman
Attorney-in-Fact
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
EXHIBITS
to
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AND
THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
STONEBRIDGE FUNDS TRUST
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document
- ------ --------
1(b) Declaration of Trust of Registrant, as amended
(8) Form of Custody Agreement between Registrant and The Fifth
Third Bank.
(9)(b) Form of Sub-Transfer Agency Agreement between ALPS Mutual
Funds Services, Inc. and State Street Bank and Trust Company.
(9)(c) Form of Fund Accounting and Services Agreement between
Registrant and The Fifth Third Bank.
OTHER EXHIBITS:
<PAGE>
<PAGE>
DECLARATION OF TRUST
OF
STONEBRIDGE FUNDS TRUST
This DECLARATION OF TRUST of STONEBRDIGE FUNDS TRUST is made on July
__, 1998 by the parties signatory hereto, as trustees.
WHEREAS, the Trustees desire to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other assets contributed to the Trust by the holders of interests
in the Trust entitled to ownership rights in the Trust;
NOW, THEREFORE, the Trustees hereby declare that the Trustees will
hold in trust all cash, securities and other assets which they may from time to
time acquire in any manner as Trustees hereunder, and manage and dispose of the
same for the benefit of the holders of interests in the Trust and subject to the
following terms and conditions.
ARTICLE I
THE TRUST
I.1 NAME. The name of the trust created hereby (the "Trust") shall
be "Stonebridge Funds Trust," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall not refer to the Trustees in their individual capacities or to the
officers, agents, employees or holders of interest in the Trust. However,
should the Trustees determine that the use of the name of the Trust is not
advisable, they may select such other name for the Trust as they deem proper and
the Trust may hold its property and conduct its activities under such other
name. Any name change shall become effective upon the execution by a majority
of the then Trustees of an instrument setting forth
<PAGE>
the new name and the filing of a certificate of amendment pursuant to Section
3810(b) of the DBTA. Any such instrument shall not require the approval of the
holders of interests in the Trust, but shall have the status of an amendment to
this Declaration.
I.2 TRUST PURPOSE. The purpose of the Trust is to conduct, operate
and carry on the business of an open-end management investment company
registered under the 1940 Act. In furtherance of the foregoing, it shall be the
purpose of the Trust to do everything necessary, suitable, convenient or proper
for the conduct, promotion and attainment of any businesses and purposes which
at any time may be incidental or may appear conducive or expedient for the
accomplishment of the business of an open-end management investment company
registered under the 1940 Act and which may be engaged in or carried on by a
trust organized under the DBTA, and in connection therewith the Trust shall have
and may exercise all of the powers conferred by the laws of the State of
Delaware upon a Delaware business trust.
I.3 DEFINITIONS. As used in this Declaration, the following terms
shall have the following meanings:
(a) "1940 ACT" shall mean the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(b) "AFFILIATED PERSON," "ASSIGNMENT" and "INTERESTED PERSON"
shall have the meanings given such terms in the 1940 Act.
(c) "ADMINISTRATOR" shall mean any party furnishing services to
the Trust pursuant to any administrative services contract described in Section
4.1 hereof.
(d) "BY-LAWS" shall mean the By-Laws of the Trust as amended
from time to time.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(f) "COMMISSION" shall mean the Securities and Exchange
Commission.
-2-
<PAGE>
(g) "DECLARATION" shall mean this Declaration of Trust as
amended from time to time. References in this Declaration to "DECLARATION,"
"HEREOF," "HEREIN" and "HEREUNDER" shall be deemed to refer to the Declaration
rather than the article or section in which such words appear. This Declaration
shall, together with the By-Laws, constitute the governing instrument of the
Trust under the DBTA.
(h) "DBTA" shall mean the Delaware Business Trust Act, Delaware
Code Annotated title 12, Sections 3801 et seq., as amended from time to time.
(i) "FISCAL YEAR" shall mean an annual period as determined by
the Trustees unless otherwise provided by the Code or applicable regulations.
(j) "HOLDERS" shall mean as of any particular time any or all
holders of record of Interests in the Trust or in Trust Property, as the case
may be, at such time.
(k) "INTEREST" shall mean a Holder's units of interest into
which the beneficial interest in the Trust and each series and class of the
Trust shall be divided from time to time.
(l) "INVESTMENT ADVISER" shall mean any party furnishing
services to the Trust pursuant to any investment advisory contract described in
Section 4.1 hereof.
(m) "MAJORITY INTERESTS VOTE" shall mean the vote, at a meeting
of the Holders of Interests, of the lesser of (A) 67% or more of the Interests
present or represented at such meeting, provided the Holders of more than 50% of
the Interests are present or represented by proxy or (B) more than 50% of the
Interests.
(n) "PERSON" shall mean and include an individual, corporation,
partnership, trust, association, joint venture and other entity, whether or not
a legal entity, and a government and agencies and political subdivisions
thereof.
(o) "REGISTRATION STATEMENT" as of any particular time shall
mean the Registration Statement of the Trust which is effective at such time
under the 1940 Act.
-3-
<PAGE>
(p) "TRUST PROPERTY" shall mean as of any particular time any
and all property, real or personal, tangible or intangible, which at such time
is owned or held by or for the account of the Trust or the Trustees or any
series of the Trust established in accordance with Section 6.2.
(q) "TRUSTEES" shall mean such persons who are indemnified as
trustees of the Trust on the signature page of this Declaration, so long as they
shall continue in office in accordance with the terms of this Declaration of
Trust, and all other persons who at the time in question have been duly elected
or appointed as trustees in accordance with the provisions of this Declaration
of Trust and are then in office, in their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
II.1 NUMBER AND QUALIFICATION. The number of Trustees shall
initially be one and shall thereafter be fixed from time to time by written
instrument signed by majority of the Trustees so fixed then in office,
provided, however, that the number of Trustees shall in no event be less than
one. A Trustee shall be an individual at least 21 years of age who is not under
legal disability.
(a) Any vacancy created by an increase in Trustees shall be
filled by the appointment or election of an individual having the qualifications
described in this Article as provided in Section 2.4. Any such appointment
shall not become effective, however, until the individual appointed or elected
shall have accepted in writing such appointment or election and agreed in
writing to be bound by the terms of the Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office.
(b) Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
II.2 TERM AND ELECTION. Each Trustee named herein, or elected or
appointed prior to the first meeting
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of the Holders, shall (except in the event of resignations or removals or
vacancies pursuant to Section 2.3 or 2.4 hereof) hold office until his or her
successor has been elected at such meeting and has qualified to serve as
Trustee. Beginning with the Trustees elected at the first meeting of Holders,
each Trustee shall hold office during the lifetime of this Trust and until its
termination as hereinafter provided unless such Trustee resigns or is removed as
provided in Section 2.3 below or his term expires pursuant to Section 2.4
hereof.
II.3 RESIGNATION AND REMOVAL. Any Trustee may resign (without need
for prior or subsequent accounting) by an instrument in writing signed by him or
her and delivered or mailed to the Chairman, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument.
(a) Any of the Trustees may be removed with or without cause
by the affirmative vote of the Holders of two-thirds (2/3) of the Interests
or (provided the aggregate number of Trustees, after such removal and after
giving effect to any appointment made to fill the vacancy created by such
removal, shall not be less than the number required by Section 2.1 hereof)
with cause, by the action of two-thirds (2/3) of the remaining Trustees.
Removal with cause shall include, but not be limited to, the removal of a
Trustee due to physical or mental incapacity.
(b) Upon the resignation or removal of a Trustee, or his or
her otherwise ceasing to be a Trustee, he or she shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the death of any Trustee
or upon removal or resignation due to any Trustee's incapacity to serve as
trustee, his or her legal representative shall execute and deliver on his or
her behalf such documents as the remaining Trustees shall require as provided
in the preceding sentence.
II.4 VACANCIES. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of the earliest to occur of the following:
the Trustee's death, resignation, adjudicated incompetence or other incapacity
to perform the duties of the office, or removal, of the Trustee. A vacancy
shall
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also occur in the event of an increase in the number of trustees as provided in
Section 2.1. No such vacancy shall operate to annul this Declaration or to
revoke any existing trust created pursuant to the terms of this Declaration. In
the case of a vacancy, the Holders of a plurality of the Interests entitled to
vote, acting at any meeting of the Holders held in accordance with Article VIII
hereof, or, to the extent permitted by the 1940 Act, a majority vote of the
Trustees continuing in office acting by written instrument or instruments, may
fill such vacancy, and any Trustee so elected by the Trustees or the Holders
shall hold office as provided in this Declaration. There shall be no cumulative
voting by the Holders in the election of Trustees.
II.5 MEETINGS. Meetings of the Trustees shall be held from time to
time within or without the State of Delaware upon the call of the Chairman, if
any, the President, the Secretary, an Assistant Secretary or any two Trustees.
(a) Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States overnight mail, by recognized overnight
delivery service, or by electronic transmission to each Trustee at his business
address as set forth in the records of the Trust or otherwise given personally
not less than 24 hours before the meeting but may be waived in writing by any
Trustee either before or after such meeting. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened.
(b) A quorum for all meetings of the Trustees shall be one-third
of the total number of Trustees, but (except at such time as there is only one
Trustee) no less than two Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority of the Trustees-, which written consent shall
be filed with the minutes of proceedings of the Trustees or any such committee.
If there be less than a quorum present at any meeting of the Trustees, a
majority of those present may adjourn the meeting until a quorum shall have been
obtained.
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(c) Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be two or more of the members thereof, unless the
Board shall provide otherwise. Unless provided otherwise in this Declaration,
any action of any such committee may be taken at a meeting by vote of a majority
of the members present (a quorum being present) or without a meeting by written
consent of a majority of the members, which written consent shall be filed with
the minutes of proceedings of the Trustees or any such committee.
(d) With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or are otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
(e) All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person," in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
II.6 OFFICERS; CHAIRMAN OF THE BOARD. The Trustees shall, from time
to time, elect officers of the Trust, including a President, a Secretary and a
Treasurer. The Trustees shall elect or appoint a Trustee to act as Chairman of
the Board who shall preside at all meetings of the Trustees and carry out such
other duties as the Trustees shall designate. The Trustees may elect or appoint
or authorize the President to appoint such other officers or agents with such
powers as the Trustees may deem to be advisable. The President, Secretary and
Treasurer may, but need not, be a Trustee. Except as set forth above, the
Chairman of the Board and such officers of the Trust shall serve in such
capacity for such time and with such authority as the Trustees may, in their
discretion, so designate or as provided by in the By-Laws.
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II.7 BY-LAWS. The Trustees may adopt and, from time to time, amend or
repeal the By-Laws for the conduct of the business of the Trust not inconsistent
with this Declaration and such By-Laws are hereby incorporated in this
Declaration by reference thereto.
ARTICLE III
POWERS OF TRUSTEES
III.1 GENERAL. The Trustees shall have exclusive and absolute
control over management of the business and affairs of the Trust, but with such
powers of delegation as may be permitted by this Declaration and the DBTA. The
Trustees may perform such acts as in their sole discretion are proper for
conducting the business and affairs of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustee may be exercised without order of or recourse to any
court.
III.2 INVESTMENTS. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebted-ness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized
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under the laws of the United States or under foreign laws; and to exercise any
and all rights, powers and privileges of ownership or interest in respect of any
and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more persons, firms, associations, or corporations to
exercise any of said rights, powers and privileges in respect of any of said
instruments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional securities in which the Trustees may determine to
invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
III.3 LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trust as a separate legal entity under the DBTA, except that the
Trustees shall have the power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees or in the name of any
other Person on behalf of the Trust on such terms as the Trustees may determine.
In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
III.4 SALE OF INTERESTS. Subject to the more detailed provisions set
forth in Article VII, the Trustees shall have the power to permit persons to
purchase Interests and to add or reduce, in whole or in part, their Interest in
the Trust.
III.5 BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including
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the lending of portfolio securities, and to endorse, guarantee or undertake the
performance of any obligation, contract or engagement of any other person, firm,
association or corporation.
III.6 DELEGATION; COMMITTEES. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments, either in the name of the Trust or the
names of the Trustees or otherwise, as the Trustees may deem expedient.
III.7 COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owned to the Trust;
and to enter into releases, agreements and other instruments.
III.8 EXPENSES. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal and brokerage services, as they in good faith may deem
reasonable (subject to any limitations in the 1940 Act), and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust. There shall
be no retirement compensation plan for Trustees; provided, however, that the
Trustees may adopt a deferred compensation plan consistent with industry and
regulatory standards.
III.9 MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies (including, but not
limited to, fidelity bonding and errors
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and omission policies) insuring the Investment Adviser, Administrator,
distributor, Holders, Trustees, officers, employees, agents, or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such person in
such capacity, whether or not the Trust would have the power to indemnify such
Person against liability; (d) establish pension, profit-sharing and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (e) to the extent permitted by law, indemnify any
Person with whom the Trust has dealings, including the Investment Adviser,
Administrator, distributor, Holders, Trustees, officers, employees, agents or
independent contractors of the Trust, to such extent as the Trustees shall
determine; (f) guarantee indebtedness or contractual obligations of others; (g)
determine and change the Fiscal Year of the Trust and the method by which its
accounts shall be kept; and (h) adopt a seal for the Trust, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust.
III.10 FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of Delaware, in any
and all states of the United States of America, in the District of Columbia, in
any foreign countries, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the United
States of America and of foreign countries, and to do all such other things and
execute all such instruments as they deem necessary, proper or desirable in
order to promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive and shall be
binding upon the Trust and the Holders, past, present and future. In construing
the provisions of this Declaration, the presumption shall be in favor of a grant
of power to the Trustees. The Trustees shall not be required to obtain any
court order to deal with Trust Property.
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
AND PLACEMENT AGENT ARRANGEMENTS
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IV.1 INVESTMENT ADVISORY AND OTHER ARRANGEMENTS. The Trustees may in
their discretion, from time to time, enter into contracts or agreements for
investment advisory services, administrative services (including transfer and
dividend disbursing agency services), distribution services, fiduciary
(including custodian) services, placement agent services, Holder servicing, or
other services, whereby the other party to such contract or agreement shall
undertake to furnish the Trustees such services as the Trustees shall, from time
to time, consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine. Notwithstanding any other
provisions of this Declaration to the contrary, the Trustees may authorize any
Investment Adviser (subject to such general or specific instructions as the
Trustees may, from time to time, adopt) to effect purchases, sales, loans or
exchanges of Trust Property on behalf of the Trustees or may authorize any
officer, employee or Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of any such Investment Adviser (all without further
action by the Trustees). Any such purchases, sales, loans and exchanges shall
be binding upon the Trust.
IV.2 PARTIES TO CONTRACT. Any contract or agreement of the character
described in Section 4.1 of this Article IV or in the By-Laws of the Trust may
be entered into with any Person, although one or more of the Trustees or
officers of the Trust or any Holder may be an officer, director, trustee,
shareholder, or member of such other party to the contract or agreement, and no
such contract or agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of such contract or agreement or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract or agreement when entered into was reasonable and fair and not
inconsistent with the provisions of this Article IV or the By-Laws. Any Trustee
or officer of the Trust or any Holder may be the other party to contracts or
agreements entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any Trustee or officer of the Trust or any Holder may be financially
interested or otherwise affiliated with Persons who are parties to any or all of
the contracts or agreements mentioned in this Section 4.2.
ARTICLE V
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LIMITATIONS OF LIABILITY
V.1 NO PERSONAL LIABILITY OF TRUSTEES OFFICERS, EMPLOYEES, AGENTS.
No Trustee, officer, employee or agent of the Trust when acting in such capacity
shall be subject to any personal liability whatsoever, in his or her individual
capacity, to any Person, other than the Trust or its Holders, in connection with
Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Trust arising in connection with the
affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders of Interests therein, or to any Trustee,
officer, employee, or agent thereof for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
V.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AGENTS. The
Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has any interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based upon review of
readily available facts
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(as opposed to a full trial-type inquiry), that he or she did not engage in such
conduct by a reasonable determination, based upon a review of the facts, that
such Person was not liable by reason of such conduct, by (a) the vote of a
majority of a quorum of Trustees who are neither "interested persons" of the
Trust as defined in Section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) a written opinion from independent legal counsel approved by
the Trustees. The rights accruing to any Person under these provisions shall
not exclude any other right to which he or she may be lawfully entitled;
provided that no Person may satisfy any right of indemnity or reimbursement
granted herein or in Section 5.1 or to which he or she may be otherwise entitled
except out of the Trust Property. The Trustees may make advance payments in
connection with indemnification under this Section 5.2, provided that the
indemnified Person shall have given a written undertaking to reimburse the Trust
in the event it is subsequently determined that he or she is not entitled to
such indemnification.
V.3 LIABILITY OF HOLDERS; INDEMNIFICATION. The Trust shall indemnify
and hold each Holder harmless from and against any claim or liability to which
such Holder may become subject solely by reason of his or her being or having
been a Holder and not because of such Holder's acts or omissions or for some
other reason, and shall reimburse such Holder for all legal and other expenses
reasonably incurred by him or her in connection with any such claim or liability
(upon proper and timely request by the Holder); provided, however, that no
Holder shall be entitled to indemnification by any series established in
accordance with Section 6.2 unless such Holder is a Holder of Interests of such
series. The rights accruing to a Holder under this Section 5.3 shall not
exclude any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein.
V.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of his or her duties hereunder.
V.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning
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the validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust, and every other act or thing
whatsoever executed in connection with the Trust, shall be conclusively taken to
have been executed or done by the executors thereof only in their capacity as
Trustees, officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made by the Trustees or by any officer, employee or agent of the Trust, in his
or her capacity as such, shall contain an appropriate recital to the effect that
the Trustee, officer, employee and agent of the Trust shall not personally be
bound by or liable thereunder, nor shall resort be had to their private property
or the private property of the Holders for the satisfaction of any obligation or
claim thereunder, and appropriate references shall be made therein to the
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, Holders, Trustees, officers, employees and agents in such amount as
the Trustees shall deem advisable.
V.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee
of the Trust shall, in the performance of his or her duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
V.7 ASSENT TO DECLARATION. Every Holder, by virtue of having become
a Holder in accordance with the terms of this Declaration, shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto.
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ARTICLE VI
INTERESTS IN THE TRUST
VI.1 GENERAL CHARACTERISTICS. (a) The Trustees shall have the power
and authority, without Holder approval, to issue Interests in one or more series
from time to time as they deem necessary or desirable. Each series shall be
separate from all other series in respect of the assets and liabilities
allocated to that series and shall represent a separate investment portfolio of
the Trust. The Trustees shall have exclusive power, without Holder approval, to
establish and designate such separate and distinct series, as set forth in
Section 6.2, and to fix and determine the relative rights and preferences as
between the Interests of the separate series as to right of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
conversion rights, and conditions under which the series shall have separate
voting rights or no voting rights.
(b) The Trustees may, without Holder approval, divide Interests
of any series into two or more classes, Interests of each such class having such
preferences and special or relative rights and privileges (including conversion
rights, if any) as the Trustees may determine as provided in Section 6.3. The
fact that a series shall have been initially established and designated without
any specific establishment or designation of classes, shall not limit the
authority of the Trustees to divide a series and establish and designate
separate classes thereof.
(c) The number of Interests authorized shall be unlimited,
and the Interests so authorized may be represented in part by fractional
Interests. From time to time, the Trustees may divide or combine the
Interests of any series or class into a greater or lesser number without
thereby changing the proportionate beneficial interests in the series or
class. The Trustees may issue Interests of any series or class thereof for
such consideration and on such terms as they may determine (or for no
consideration if pursuant to an Interest dividend or split-up), all without
action or approval of the Holders. All Interests when so issued on the terms
determined by the Trustees shall be fully paid and non-assessable. The
Trustees may classify or reclassify any unissued Interests or any Interests
previously issued and reacquired of any series or class thereof into one or
more series or classes thereof that may
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be established and designated from time to time. The Trustees may hold as
treasury Interests, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Interests of
any series or class thereof reacquired by the Trust.
VI.2 ESTABLISHMENT OF SERIES OF INTERESTS. (a) Without limiting the
authority of the Trustees set forth in Section 6.2(b) to establish and designate
any further series, the Trustees hereby establish and designate two series, as
follows:
Stonebridge Growth Fund
Stonebridge Aggressive Growth Fund
The provisions of this Article VI shall be applicable to the above
designated series and any further series that may from time to time be
established and designated by the Trustees as provided in Section 6.2(b).
(b) The establishment and designation of any series of Interests
other than those set forth above 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 as
otherwise provided in such instrument. At any time that there are no Interests
outstanding of any particular series previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that series and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
(c) Section 9.2 of this Agreement shall apply also with respect
to each such series as if such series were a separate trust.
VI.3 ESTABLISHMENT OF CLASSES. (a) Without limiting the authority
of the Trustees set forth in section 6.3(b) to establish and designate any
further classes, the Trustees hereby establish and designate two classes of
Interests of each series of the Trust: Class A Interests and Class B Interests.
The Interests of each such class shall be identical in all respects except as
follows: (1) each class shall bear the distribution expenses allocable to sales
of Interests of such class, as determined by the Trustees; (2) each class
shall bear other expenses of the series that are related to services provided
only to the holders of Interests of such class, as determined by the
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Trustees; (3) Class B Interests of a series shall automatically convert to
Class A Interests of such series at such time as the Trustees specify; (4)
Class A and Class B Interests of a series may be exchanged for Class A and
Class B Interests, respectively, of any other series, on such terms as are
determined by the Trustees; and (5) the Holders of Class B Interests of a
series shall have exclusive voting rights with respect to certain matters as
set forth in Section 6.7. Determinations of such differences between classes
shall be set forth in a written plan adopted by a majority of the Trustees.
(b) The division of any series into two or more classes and the
establishment and designation of such classes, other than as set forth above,
shall be effective upon the execution by a majority of the then Trustees of an
Instrument setting forth such division, and the establishment, designation, and
relative rights and preferences of such classes, or as otherwise provided in
such instrument. The relative rights and preferences of the classes of any
series may differ in such respects as the Trustees may determine to be
appropriate, provided that such differences are set forth in the aforementioned
instrument. At any time that there are no Interests outstanding of any
particular class previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
VI.4 ASSETS OF SERIES. All consideration received by the Trust for
the issue or sale of Interests of a particular series together with all Trust
Property 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 of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. Separate and distinct records shall be maintained for each series and
the assets associated with a series shall be held and accounted for separately
from the other assets of the Trust, or any other series. In the event that
there is any Trust Property, or any income, earnings, profits, and proceeds
thereof, funds, or payments
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which are not readily identifiable as belonging to any particular series, the
Trustees shall allocate them 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. Each such allocation by the Trustees
shall be conclusive and binding upon the Holders of all Interests for all
purposes.
VI.5 LIABILITIES OF SERIES. (a) The Trust Property 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. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Holders of all
Interests 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 Holders.
(b) Without limitation of the foregoing provisions of this
Section, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular series shall be
enforceable against the assets of such series only, and not against the assets
of any other series. Notice of this limitation on interseries liabilities shall
be set forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the DBTA, and upon the giving of such notice
in the certificate of trust, the statutory provisions of Section 3804 of the
DBTA relating to limitations on interseries liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each series. Every note, bond,
contract or other undertaking issued by or on behalf of a particular series
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shall include a recitation limiting the obligation represented thereby to that
series and its assets.
VI.6 DIVIDENDS AND DISTRIBUTIONS. (a) Dividends and distributions on
Interests of a particular series or any class thereof may be paid with such
frequency as the Trustees may determine, which may be daily or otherwise,
pursuant to a standing resolution or resolution adopted only once or with such
frequency as the Trustees may determine, to the Holders of Interests in that
series or class, from such of the income and capital gains, accrued or realized,
from the Trust Property belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
series. All dividends and distributions on Interests in a particular series or
class thereof shall be distributed pro rata to the Holders of Interests in that
series or class in proportion to the total outstanding Interests in that series
or class held by such Holders at the date and time of record established for the
payment of such dividends or distribution, except to the extent otherwise
required or permitted by the preferences and special or relative rights and
privileges of any series or class. Such dividends and distributions may be made
in cash or Interests of that series or class 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 Holder of the mode of the making
of such dividend or distribution to that Holder. Any such dividend or
distribution paid in Interests will be paid at the net asset value thereof as
determined in accordance with Section 7.4.
(b) The Interests in a series or a class of the Trust shall
represent beneficial interests in the Trust Property belonging to such series or
in the case of a class, belonging to such series and allocable to such class.
Each Holder of Interests in a series or a class shall be entitled to receive its
pro rata share of distributions of income and capital gains made with respect to
such series or such class. Upon reduction or withdrawal of its Interests or
indemnification for liabilities incurred by reason of being or having been a
Holder of Interests in a series or a class, such Holder shall be paid solely out
of the funds and property of such series or in the case of a class, the funds
and property of such series and allocable to such class of the Trust. Upon
liquidation or termination of a series or class of the Trust, Holders of
Interests in such series or class shall be entitled to receive a pro rata share
of the
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Trust Property belonging to such series or in the case of a class, belong to
such series and allocable to such class.
VI.7 VOTING RIGHTS. Notwithstanding any other provision hereof, on
each matter submitted to a vote of the Holders, each Holder shall be entitled to
one vote for each whole Interest standing in his name on the books of the Trust,
and each fractional Interest shall be entitled to a proportionate fractional
vote, irrespective of the series thereof or class thereof and all Interests of
all series and classes thereof shall vote together as a single class; provided,
however, that as to any matter (i) with respect to which a separate vote of one
or more series or classes thereof is permitted or required by the 1940 Act or
the provisions of the instrument establishing and designating the series or
class, such requirements as to a separate vote by such series or class thereof
shall apply in lieu of all Interests of all series and classes thereof voting
together; and (ii) as to any matter which affects only the interests of one or
more particular series or classes thereof, only the Holders of the one or more
affected series or class shall be entitled to vote, and each such series or
class shall vote as a separate class.
VI.8 RECORD DATES. The Trustees may from time to time close the
transfer books or establish record dates and times for the purposes of
determining the Holders entitled to be treated as such, to the extent provided
or referred to in Section 8.6.
VI.9 TRANSFER. All Interests of each particular series or class
thereof shall be transferable, but transfers of Interests of a particular series
or class thereof will be recorded on the Interest transfer records of the Trust
applicable to that series or class only at such times as Holders shall have the
right to require the Trust to redeem Interests of that series or class and at
such other times as may be permitted by the Trustees.
VI.10 EQUALITY. Except as provided herein or in the instrument
designating and establishing any class or series, all Interests of each
particular series or class thereof shall represent an equal proportionate
interest in the assets belonging to that series, or in the case of a class,
belonging to that series and allocable to that class, subject to the liabilities
belonging to that series, and each Interest of any particular series or classes
shall be equal to each other Interest of that series or class; but the
provisions of this sentence shall not restrict any
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distinctions permissible under Section 6.7 that may exist with respect to
dividends and distributions on Interests of the same series or class. The
Trustees may from time to time divide or combine the Interests of any particular
series or class into a greater or lesser number of Interests of that series or
class without thereby changing the proportionate beneficial interest in the
assets belonging to that series or class or in any way affecting the rights or
Interests of any other series or class.
VI.11 FRACTIONS. Any fractional Interest of any series or class, if
any such fractional Interest is outstanding, shall carry proportionately all the
rights and obligations of a whole Interest of that series or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Interests, and liquidation of the Trust.
VI.12 CLASS DIFFERENCES. Subject to Section 6.3, the relative rights
and preferences of the classes of any series may differ in such other respects
as the Trustees may determine to be appropriate in their sole discretion,
provided that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees.
VI.13 CONVERSION OF INTERESTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that Holders of Interests of any series shall have the right to convert said
Interests into one or more other series in accordance with such requirements and
procedures as may be established by the Trustees. The Trustees shall also have
the authority to provide that Holders of Interests of any class of a particular
series shall have the right to convert said Interests into one or more other
classes of that particular series or any other series in accordance with such
requirements and procedures as may be established by the Trustees.
VI.14 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
Interests that conform to such authorized terms and to reject any purchase
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orders for Interests whether or not conforming to such authorized terms.
VI.15 TRUSTEES AND OFFICERS AS HOLDERS. 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 Interests 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 Interests 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 Interests generally.
VI.16 NO PRE-EMPTIVE RIGHTS; DERIVATIVE SUITS. Holders shall have no
pre-emptive or other right to subscribe to any additional Interests or other
securities issued by the Trust. No action may be brought by a Holder on behalf
of the Trust unless Holders owning no less than 10% of the then outstanding
Interests, or series or class thereof, join in the bringing of such action. A
Holder of Interests in a particular series or a particular class of the Trust
shall not be entitled to participate in a derivative or class action lawsuit on
behalf of any other series or any other class or on behalf of the Holders of
Interests in any other series or any other class of the Trust.
VI.17 NO APPRAISAL RIGHTS. Holders shall have no right to demand
payment for their Interests or to any other rights of dissenting Holders in the
event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a stockholder of a corporation organized
under the General Corporation Law of Delaware, or otherwise.
VI.18 STATUS OF INTERESTS AND LIMITATION OF PERSONAL LIABILITY.
Interests shall be deemed to be personal property giving only the rights
provided in this Amended and Restated Declaration of Trust. Every Holder by
virtue of acquiring Interests shall be held to have expressly assented and
agreed to the terms hereof and to be bound hereby. The death, incapacity,
dissolution, termination or bankruptcy of a Holder during the continuance of the
Trust shall not operate to dissolve or terminate the Trust or any series thereof
nor entitle the representative of such Holder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but
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shall entitle the representative of such Holder only to the rights of such
Holder under this Trust. Ownership of Interests shall not entitle the Holder 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 Interests constitute the Holders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust, shall have any
power to bind personally any Holder, nor except as specifically provided herein
to call upon any Holder for the payment of any sum of money or assessment
whatsoever other than such as the Holder may at any time personally agree to
pay.
ARTICLE VII
PURCHASES AND REDEMPTIONS
VII.1 PURCHASES. The Trustees, in their discretion, may, from time
to time, without a vote of the Holders, permit the purchase of Interests by such
party or parties (or increase in the Interests of a Holder) and for such type of
consideration, including, without limitation, cash or property, at such time or
times (including, without limitation, each business day), and on such terms as
the Trustees may deem best, and may in such manner acquire other assets
(including, without limitation, the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.
VII.2 REDEMPTION BY HOLDER. (a) Each Holder of Interests of the
Trust or any series or class thereof, shall have the right at such times as may
be permitted by the Trust to require the Trust to redeem all or any part of his
or her Interests of the Trust, or series or class thereof, at a redemption price
equal to the net asset value per Interest of the Trust or series or class
thereof, next determined in accordance with Section 7.4 hereof after the
Interests are properly tendered for redemption, subject to any contingent
deferred sales charge or redemption charge in effect at the time of 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,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Trust or series or class thereof of
which the Interests being
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redeemed are part at the value of such securities or assets used in such
determination of net asset value.
(b) Notwithstanding the foregoing, the Trust may postpone
payment of the redemption price and may suspend the right of the Holders of
Interests of the Trust, or series or class thereof, to require the Trust to
redeem Interests of the Trust, or of any series or class thereof, during any
period or at any time when and to the extent permissible under the 1940 Act.
VII.3 REDEMPTION BY TRUST. Each Interest of the Trust, or series or
class thereof, that has been established and designated is subject to redemption
by the Trust at the redemption price which would be applicable if such Interest
was then being redeemed by the Holder pursuant to Section 7.2 hereof: (i) at any
time, if the Trustees determine in their sole discretion and by majority vote
that it is in the best interests of the Trust, or any series or class thereof,
to abolish any series or class of the Trust, or (ii) upon such other conditions
as may from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust with respect to maintenance of Holder accounts
of a minimum amount. Upon such redemption the Holders of the Interests so
redeemed shall have no further right with respect thereto other than to receive
payment of such redemption price.
VII.4 NET ASSET VALUE. (a) The net asset value per Interest of any
series shall be (i) in the case of a series whose Interests are not divided into
classes, 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 Interests of that
series outstanding, and (ii) in the case of a class of Interests of a series
whose Interests are divided into classes, the quotient obtained by dividing the
value of the net assets of that series allocable to such class (being the value
of the assets belonging to that series allocable to such class less the
liabilities allocable to such class) by the total number of Interests of such
class 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.
(b) The Trustees may determine to maintain the net asset value
per Interest of any series or any class at a designated constant dollar amount
and in connection
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therewith may adopt procedures consistent with the 1940 Act for continuing
declarations of income attributable to that series or that class as dividends
payable in additional Interests of that series at the designated constant dollar
amount and for the handling of any losses attributable to that series or that
class. Such procedures may provide that in the event of any loss each Holder
shall be deemed to have contributed to the capital of the Trust attributable to
that series his or her pro rata portion of the total number of Interests
required to be cancelled in order to permit the net asset value per Interest of
that series or class to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Holder of the Trust shall be deemed to
have agreed, by his or her investment in any series or class with respect to
which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such loss
ARTICLE VIII
HOLDERS
VIII.1 RIGHTS OF HOLDERS. The right to conduct any business
hereinbefore described is vested exclusively in the Trustees, and the Holders
shall have no rights under this Declaration or with respect to the Trust
Property other than the beneficial interest conferred by their Interests and the
voting rights accorded to them under this Declaration.
VIII.2 REGISTER OF INTERESTS. A register shall be kept by the Trust
under the direction of the Trustees which shall contain the names and addresses
of the Holders and Interests held by each Holder. Each such register shall be
conclusive as to the identity of the Holders of the Trust and the Persons who
shall be entitled to payments of distributions or otherwise to exercise or enjoy
the rights of Holders. No Holder shall be entitled to receive payment of any
distribution, nor to have notice given to it as herein provided, until it has
given its address to such officer or agent of the Trustees as shall keep the
said register for entry thereon. No certificates certifying the ownership of
interests need be issued except the Trustees may otherwise determine from time
to time.
VIII.3 NOTICES. Any and all notices to which any Holder hereunder
may be entitled and any and all communications shall be deemed duly served or
given if presented personally to a Holder, left at his or her
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residence or usual place of business or sent via United States mail or by
electronic transmission to a Holder at his or her address as it is registered
with the Trust, as provided in Section 8.2. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
Holder at his or her address as it is registered with the Trust, as provided in
Section 8.2, with postage thereon prepaid.
VIII.4 MEETINGS OF HOLDERS. Meetings of the Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests (or series or class thereof), such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall be held
within or without the State of Delaware on such day and at such time as the
Trustees shall designate. Holders of one-third of the Interests in the Trust,
present in person or by proxy, shall constitute a quorum for the transaction of
any business, except as may otherwise be required by the 1940 Act or other
applicable law or by this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote by the Holders present, in person
or by proxy, holding more than 50% of the total Interests (or series or class
thereof) of the Holders present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless the 1940 Act, other applicable
law, this Declaration or the By-Laws of the Trust requires a greater number of
affirmative votes. Notwithstanding the foregoing, the affirmative vote by the
Holders present, in person or by proxy, holding less than 50% of the Interests
(or class or series thereof) of the Holders present, in person or by proxy, at
such meeting shall be sufficient for adjournments. Any meeting of Holders,
whether or not a quorum is present, may be adjourned for any lawful purpose
provided that no meeting shall be adjourned for more than six months beyond the
originally scheduled meeting date. Any adjoined session or sessions may be
held, within a reasonable time after the date set for the original meeting
without the necessity of further notice.
VIII.5 NOTICE OF MEETINGS. Written or printed notice of all meetings
of the Holders, stating the time, place and purposes of the meeting, shall be
given as provided in Section 8.3 for the giving of notices. At any such
meeting, any business properly before the meeting may be considered whether or
not stated in the notice of the
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meeting. Any adjourned meeting held as provided in Section 8.4 shall not require
the giving of additional notice.
VIII.6 RECORD DATE. For the purpose of determining the Holders who
are entitled to notice of any meeting and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time fix a date, not more than 90 calendar days prior
to the date of any meeting of the Holders or payment of distributions or other
action, as the case may be, as a record date for the determination of the
persons to be treated as Holders of record for such purposes, and any Holder who
was a Holder at the date and time so fixed shall be entitled to vote at such
meeting or to be treated as a Holder of record for purposes of such other
action, even though he or she has since that date and time disposed of his or
her Interests, and no Holder becoming such after that date and time shall be so
entitled to vote at such meeting or to be treated as a Holder of record for
purposes of such other action. If the Trustees shall divide the Interests into
two or more series in accordance with Section 6.2 herein, nothing in this
Section shall be construed as precluding the Trustees from setting different
record dates for different series and if the Trustees shall divide any series
into two or more classes in accordance with Section 6.3 herein, nothing in this
Section 8.5 shall be construed as precluding the Trustees from setting different
record dates for different classes.
VIII.7 PROXIES, ETC. At any meeting of Holders, any Holder entitled
to vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken.
(a) Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Holders of record shall be entitled to vote.
Each Holder shall be entitled to a vote proportionate to its Interest in the
Trust.
(b) When Interests are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect of such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so
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present disagree as to any vote to be cast, such vote shall not be received in
respect of such Interest.
(c) A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger. If the Holder is
a minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person regarding the charge or management of its Interest,
he or she may vote by his or her guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
VIII.8 REPORTS. The Trustees shall cause to be prepared, at least
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of the Trust prepared in conformity with
generally accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
furnish to the Holders at least semi-annually interim reports containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current Fiscal
Year to the end of such period.
VIII.9 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Holders during normal business hours and for any purpose not
harmful to the Trust.
VIII.10 VOTING POWERS. (a) The Holders shall have power to vote only
(i) for the election of Trustees as contemplated by Section 2.2 hereof, (ii)
with respect to any investment advisory contract as contemplated by Section 4.1
hereof, (iii) with respect to termination of the Trust as provided in Section
9.2 hereof, (iv) with respect to amendments to the Amended and Restated
Declaration of Trust as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Section 9.4 hereof, (vi)
with respect to incorporation of the Trust to the extent and as provided in
Section 9.5 hereof, (vii) with respect to such additional matters relating to
the Trust as may be required by the 1940 Act, DBTA, or any other applicable law,
the Declaration, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as and when the Trustees
may consider necessary or desirable.
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(b) Each Holder shall be entitled to vote based on the ratio its
Interest bears to the Interests of all Holders entitled to vote. Until
Interests are issued, the Trustees may exercise all rights of Holders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Holders. The By-Laws may include further provisions for Holders' votes and
meetings and related matters not inconsistent with this Declaration.
VIII.11 HOLDER ACTION BY WRITTEN CONSENT. Any action which may be
taken by Holders may be taken without notice and without a meeting if Holders
holding more than 50% of the total Interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) shall consent to the action in writing and the written consents
shall be filed with the records of the meetings of Holders. Such consents shall
be treated for all purposes as votes taken at a meeting of Holders.
VIII.12 HOLDER COMMUNICATIONS. (a) Whenever ten or more Holders who
have been such for at least six months preceding the date of application, and
who hold in the aggregate at least 1% of the total Interests, shall apply to the
Trustees in writing, stating that they wish to communicate with other Holders
with a view to obtaining signatures to a request for a meeting of Holders and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either (1) afford to such applicants access to a list of the names and addresses
of all Holders as recorded on the books of the Trust; or (2) inform such
applicants as to the approximate number of Holders, and the approximate cost of
transmitting to them the proposed communication and form of request.
(b) If the Trustees elect to follow the course specified in
clause (2) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be transmitted and of the reasonable
expenses of transmission, shall, with reasonable promptness, transmit, by United
States mail or by electronic transmission, such material to all Holders at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall transmit, by United States mail or by electronic
transmission, to such applicants and file with the Commission, together with a
copy of the material to be transmitted, a written statement signed by at least a
majority of the Trustees to the effect
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that in their opinion either such material contains untrue statements of fact or
omits to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion. The Trustees shall thereafter comply with any order entered by
the Commission and the requirements of the 1940 Act and the Securities Exchange
Act of 1934.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS: ETC.
IX.1 DURATION. Subject to possible termination in accordance with
the provisions of Section 9.2, the Trust created hereby shall continue
perpetually pursuant to Section 3808 of DBTA.
IX.2 TERMINATION OF TRUST.
(a) The Trust may be terminated (i) by the affirmative vote of
the Holders of not less than two-thirds of the Interests in the Trust at any
meeting of the Holders, or (ii) by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the Holders of not less
than two-thirds of such Interests, or (iii) by the Trustees by written notice to
the Holders. Upon any such termination,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, or otherwise dispose of
all or all or any part of the remaining Trust Property to one or more
Persons at public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate to
liquidate its business; provided that any sale, conveyance, assignment,
exchange, or other disposition of all or substantially all of the Trust
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Property shall require approval of the principal terms of the transaction
and the nature and amount of the consideration by the Holders by a Majority
Interests Vote.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property, in cash or in kind or
partly each, among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the Holders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination and file a certificate of cancellation in accordance with Section
3810 of the DBTA. Upon termination of the Trust, the Trustees shall thereon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Holders shall thereupon cease.
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IX.3 AMENDMENT PROCEDURE.
(a) All rights granted to the Holders under this Declaration
of Trust are granted subject to the reservation of the right of the Trustees
to amend this Declaration of Trust as herein provided, except as set forth
herein to the contrary. Subject to the foregoing, the provisions of this
Declaration of Trust (whether or not related to the rights of Holders) may be
amended at any time, so long as such amendment is not in contravention of
applicable law, including the 1940 Act, 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). 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 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.
(b) No amendment may be made, under Section 9.3(a) above,
which would change any rights with respect to any Interest in the Trust by
reducing the amount payable thereon upon liquidation of the Trust, by
repealing the limitations on personal liability of any Holder or Trustee, or
by diminishing or eliminating any voting rights pertaining thereto, except
with a Majority Interests Vote.
(c) A certification signed by a majority of the Trustees
setting forth an amendment and reciting that it was duly adopted by the
Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust.
(d) Notwithstanding any other provision hereof, until such
time as Interests are first sold, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the Trustees
or by an instrument signed by a majority of the Trustees.
IX.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of its
property, including its good will, upon such terms and conditions and for such
consideration when and as authorized
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by no less than a majority of the Trustees and by a Majority Interests Vote of
the Trust or by an instrument or instruments in writing without a meeting,
consented to by the Holders of not less than 50% of the total Interests of the
Trust and any such merger, consolidation, sale, lease or exchange shall be
deemed for all purposes to have been accomplished under and pursuant to the
statutes of the State of Delaware. In accordance with Section 3815(f) of DBTA,
an agreement of merger or consolidation may effect any amendment to the
Declaration or By-Laws or effect the adoption of a new declaration of trust or
by-laws of the Trust if the Trust is the surviving or resulting business trust.
A certificate of merger or consolidation of the Trust shall be signed by a
majority of the Trustees.
IX.5 INCORPORATION. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property, or series thereof,
or to carry on any business in which the Trust shall directly or indirectly have
any interest, and to sell, convey and transfer the Trust Property, or series
thereof, to any such corporation, trust, association or organization in exchange
for the equity interests thereof or otherwise, and to lend money to, subscribe
for the equity interests of, and enter into any contracts with any such
corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire equity interests. The Trustees may also cause a
merger or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of the Holders for the
Trustees to organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.
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ARTICLE X
MISCELLANEOUS
X.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS. The
Trust shall file, in accordance with Section 3812 of DBTA, in the office of the
Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 by DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at
least one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall
comply with Section 3807(b) of DBTA by having and maintaining a registered
office in Delaware and by designating a registered agent for service of process
on the Trust, which agent shall have the same business office as the Trust's
registered office. The failure to file any such certificate, to maintain a
registered office, to designate a registered agent for service of process, or to
include such other information shall not affect the validity of the
establishment of the Trust, the Declaration, the By-Laws or any action taken by
the Trustees, the Trust officers or any other Person with respect to the Trust
except insofar as a provision of the DBTA would have governed, in which case the
Delaware common law governs.
X.2 GOVERNING LAW. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code or (b) any provisions of the laws (statutory or common) of the
State of Delaware (other than the DBTA) pertaining to trusts which are
inconsistent with the rights, duties, powers, limitations or liabilities of the
Trustees set forth or referenced in this Declaration.
X.3 COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
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X.4 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any person dealing with the Trustees and their successors.
X.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the DBTA, or with other applicable
laws and regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
X.6 TRUST ONLY. It is the intention of the Trustees to create only a
business trust under DBTA with the relationship of Trustee and beneficiary
between the Trustees and each Holder from time to time. It is not the intention
of the Trustees to create a general partnership, limited partnership, joint
stock association, corporation, bailment, or any form of legal relationship
other than a Delaware business trust except to the extent such trust is deemed
to constitute a corporation under the Code and applicable state
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tax laws. Nothing in this Declaration of Trust shall be construed to make the
Holders, either by themselves or with the Trustees, partners or members of a
joint stock association.
X.7 WITHHOLDING. Should any Holder be subject to withholding
pursuant to the Code or any other provision of law, the Trust shall withhold all
amounts otherwise distributable to such Holder as shall be required by law and
any amounts so withheld shall be deemed to have been distributed to such Holder
under this Declaration of Trust. If any sums are withheld pursuant to this
provision, the Trust shall remit the sums so withheld to and file the required
forms with the Internal Revenue Service, or other applicable government agency.
X.8 HEADINGS AND CONSTRUCTION. 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. Whenever the
singular number is used herein, the same shall include the plural; and the
neuter, masculine and feminine genders shall include each other, as applicable.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
July , 1998
- ------------------------------------ --
Richard C. Barrett
Trustee
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CUSTODY AGREEMENT
THIS AGREEMENT, is made as of ___________, 1998, by and between
STONEBRIDGE FUNDS TRUST, a business trust organized under the laws of the State
of Delaware (the "Trust"), and THE FIFTH THIRD BANK, a banking company organized
under the laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of its investment
portfolios identified in Exhibit A hereto (the "Funds"), be held and
administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Funds and named in Exhibit B hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time
serving under the Trust's Declaration of Trust and By-Laws, as from time to time
amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day
by The New York Stock Exchange, Inc. and any other day for which the Trust
computes the net asset value of the Funds.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.6 "OFFICER" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Trust.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of
<PAGE>
the transaction or the authorization thereof by the Trust. If Oral Instructions
vary from the Written Instructions which purport to confirm them, the Custodian
shall notify the Trust of such variance but such Oral Instructions will govern
unless the Custodian has not yet acted.
1.8 "CUSTODY ACCOUNT" shall mean any account in the name of each Fund,
which is provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Participants Fund Company
or The Depository Fund Company and (provided that Custodian shall have received
a copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Funds) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities, other
money market instruments or other obligations, and any certificates, receipts,
warrants or other instruments or documents representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
1.12 "SHARES" shall mean the units of beneficial interest of the Funds
issued by the Trust.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications
actually received by the Custodian and signed by one or more persons as the
Board of Trustees shall have from time to time authorized, or (ii)
communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be Authorized, or (iii) communications
transmitted electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to Custodian and
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Trust at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Trust.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth and
in accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Trust of any laws, rules or regulations.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of each Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
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3.2 CUSTODY ACCOUNT. The Custodian shall open and maintain in its
trust department a custody account in the name of each Fund, subject only to
draft or order of the Custodian, in which the Custodian shall enter and carry
all Securities, cash and other assets of each Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a custodian
under the 1940 Act, as sub-custodian to hold Securities and cash of the Funds
and to carry out such other provisions of this Agreement as it may determine,
and may also open and maintain one or more banking accounts with such a bank or
trust company (any such accounts to be in the name of the Custodian and subject
only to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or
cause to be delivered, to the Custodian all of the Funds' Securities, cash and
other assets, including (a) all payments of income, payments of principal and
capital distributions received by the Funds with respect to such Securities,
cash or other assets owned by the Funds at any time during the period of this
Agreement, and (b) all cash received by the Funds for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Funds shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry
System all Securities eligible for deposit therein and to make use
of such Securities Depository or Book-Entry System to the extent
possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral consisting of
Securities. So long as such Securities Depository or Book-Entry
System shall continue to be employed for the deposit of Securities
of the Funds, shall annually re-adopt such resolution and deliver
a copy thereof, certified by an Officer, to the Custodian.
(b) Securities of the Funds kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of
the Custodian in such Book-Entry System or Securities Depository
which includes only assets held by the Custodian as a fiduciary,
custodian or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the
books of the Book-Entry System and Securities Depository as the
case may be, with respect to Securities of each Fund maintained in
a Book-Entry System or Securities Depository shall, by book-entry,
or otherwise identify such Securities as belonging to such Fund.
(d) If Securities purchases by the Funds are to be held in a
Book-Entry System or Securities Depository, the Custodian shall
pay for such Securities upon (i) receipt of advice from the
Book-Entry System or Securities Depository that such Securities
have been transferred to the Depository Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
payment and transfer for the accounts of the Funds. If Securities
sold by the specific Fund are held in a Book-Entry System or
Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System
or Securities depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of
entries on the records of the Custodian to reflect such transfers
and payments for the account of the Funds.
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(e) Upon request, the Custodian shall provide the Trust with copies of
any report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Funds are kept)
on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to
the Trust resulting (i) from the use of a Book-Entry System or
Securities Depository by reason of any negligence or willful
misconduct on the part of Custodian or any sub-custodian appointed
pursuant to Section 3.3 above or any of its or their employees, or
(ii) from failure of Custodian or any such sub-custodian to
enforce effectively such rights as it may have against a
Book-Entry System or Securities Depository. At its election, the
Trust shall be subrogated to the rights of the Custodian with
respect to any claim against a Book-Entry System or Securities
Depository or any other person for any loss or damage to the Trust
arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Trust has been made
whole for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from the Custody
Account for a Fund but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only (i) in the
case of Securities (other than options on Securities, futures
contracts and options on futures contracts), against the delivery
to the Custodian (or any sub-custodian appointed pursuant to
Section 3.3 above) of such Securities registered as provided in
Section 3.9 below in proper form for transfer, or if the purchase
of such Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth
in Section 3.5 above; (ii) in the case of options on Securities,
against delivery to the Custodian (or such sub-custodian) of such
receipts as are required by the customs prevailing among dealers
in such options; (iii) in the case of futures contracts and
options on futures contracts, against delivery to the Custodian
(or such sub-custodian) of evidence of title thereto in favor of
the Fund or any nominee referred to in Section 3.9 below; and (iv)
in the case of repurchase or reverse repurchase agreements entered
into between the Fund and any bank which is a member of the
Federal Reserve System or between the Fund and any primary dealer
in U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System or
Securities Depository for the account of the Fund with such
Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
from the Fund declared by the Trust;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
accounts of the Fund: interest; taxes; administration, investment
management, investment advisory, accounting, auditing, transfer
agent, custodian, trustee and legal fees; and other operating
expenses of the Trust; in all cases, whether or not such expenses
are to be in whole or in part capitalized or treated as deferred
expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to
compliance with rules of The Options Clearing Corporation and of
any registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
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(g) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar organization
or organizations) regarding account deposits in connection with
transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including
the Custodian), which deposit or account has a term of one year or
less; and
(i) For any other proper purposes, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and
purpose of such payment, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt
of Proper Instructions, the Custodian shall release and deliver Securities from
a Custody Account for a Fund but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided that, in
any such case, the cash or other consideration is to be delivered
to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Fund, the Custodian or any sub-custodian appointed pursuant
to Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such case,
the new Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the issuer of such Securities, or pursuant to provisions for
conversion contained in such Securities, or pursuant to any
deposit agreement, including surrender or receipt of underlying
Securities in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by such Fund, but only against
receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
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(l) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Trust, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar organization
or organizations) regarding account deposits in connection with
transactions by the Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the
Securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise
instructed by the Trust, the Custodian shall with respect to all Securities held
for each Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income
and other payments to which the Fund is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on
a timely basis the amount payable upon all Securities which may
mature or be called, redeemed, or retired, or otherwise become
payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Fund at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities
Depository, all rights and similar securities issued with respect
to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase, transfer
and other dealings with Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for
a Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Fund, if eligible therefor. All other
Securities held for the Fund may be registered in the name of the Fund, the
Custodian, or any sub-custodian appointed pursuant to Section 3.3 above, or in
the name of any nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either thereof; provided, however, that
such Securities are held specifically for the account of the Fund. The Trust
shall furnish to the Custodian appropriate instruments to enable the Custodian
to hold or deliver in proper form for transfer, or to register in the name of
any of the nominees hereinabove referred to or in the name of a Book-Entry
System or Securities Depository, any Securities registered in the name of either
Fund.
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3.10 RECORDS. (a) The Custodian shall maintain complete and accurate
records with respect to Securities, cash or other property held for each Fund,
including (i) journals or other records of original entry containing an itemized
daily record in detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records) reflecting
(A) Securities in transfer, (B) Securities in physical possession, (C) monies
and Securities borrowed and monies and Securities loaned (together with a record
of the collateral therefor and substitutions of such collateral), (D) dividends
and interest received, and (E) dividends receivable and interest accrued; and
(iii) canceled checks and bank records related thereto. The Custodian shall
keep such other books and records of the Trust as the Trust shall reasonably
request, or as may be required by the 1940 Act, including, but not limited to
Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i)
be maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust
with a daily activity statement a summary of all transfers to or from the
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement,
of the Securities and moneys held for the Funds under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all
proxies if any, relating to Securities which are not registered in the name of
the Funds, to be promptly executed by the registered holder of such Securities,
without indication of the manner in which such proxies are to be voted, and
shall include all other proxy materials, if any, promptly deliver to the Funds
such proxies, all proxy soliciting materials, which should include all other
proxy materials, if any, and all notices to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. Custodian will promptly notify
the Trust of corporate actions, limited to those Securities registered in
nominee name and to those Securities held at a Depository or sub-Custodian
acting as agent for Custodian. Custodian will be responsible only if the notice
of such corporate actions is published by the Financial Daily Card Service, J.J.
Kenny Called Bond Service, DTC, or received by first class mail from the agent.
For market announcements not yet received and distributed by Custodian's
services, Trust will inform its custody representative with appropriate
instructions. Custodian will, upon receipt of Trust's response within the
required deadline, affect such action for receipt or payment for the Trust. For
those responses received after the deadline, Custodian will affect such action
for receipt or payment, subject to the limitations of the agent(s) affecting
such actions. Custodian will promptly notify Trust for put options only if the
notice is received by first class mail from the agent. The Trust will provide
or cause to be provided to Custodian with all relevant information contained in
the prospectus for any security which has unique put/option provisions and
provide Custodian with specific tender instructions at least ten business days
prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities
for either Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by a
Fund pay out of the moneys held for the account of the Fund the total amount
specified in such Written Instructions to
7
<PAGE>
the persons named therein. The Custodian shall not be under any obligation to
pay out moneys to cover the costs of purchases of Securities for a Fund, if in
the relevant Custody Account there is insufficient cash available to the Fund
for which such purchases were made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. In any and every case where payments for the purchases of Securities
for a Fund are made by the Custodian in advance of receipts for the accounts of
the Fund of the Securities purchased but in the absence of specific Written or
Oral Instructions to so pay in advance, the Custodian shall be liable to the
Fund for such Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by
either Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any), or other units sold, (c) the date of sale and
settlement (d) the sale price per unit, (e) the total amount payable upon such
sale, and (f) the person to whom such Securities are to be delivered. Upon
receipt of the total amounts payable to the Fund as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from
time to time, the Custodian may credit the relevant Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the relevant Fund. Any
such credit shall be conditional upon actual receipt by Custodian of final
payment and may be reversed if final payment is not actually received in full.
The Custodian may, in its sole discretion and from time to time, permit the
relevant Fund to use funds so credited to its Custody Account in anticipation of
actual receipt of final payment. Any such funds shall be repayable immediately
upon demand made by the Custodian at any time prior to the actual receipt of all
final payments in anticipation of which funds were credited to the Custody
Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its
sole discretion and from time to time, advance funds to either Fund to
facilitate the settlement of the Fund transactions on behalf of the Fund in its
Custody Account. Any such advance shall be repayable immediately upon demand
made by Custodian.
ARTICLE V
REDEMPTION OF TRUST SHARES
TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of either Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Fund may designate with respect to such amount in such
Proper Instructions. Upon effecting payment or distribution in accordance with
Proper Instructions, the Custodian shall not be under any obligation or have any
responsibility thereafter with respect to any such paying bank.
8
<PAGE>
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity
Futures Trading commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in
connection with financial futures contracts (or options thereon)
purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities made by the
Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase
agreements and when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees, certified by an Officer, setting forth
the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys'' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian appointed
pursuant to Section 3.3 above. The Custodian's cumulative liability within a
calendar year shall be limited with respect to the Trust or any party claiming
by, through or on behalf of the Trust for the initial and all subsequent renewal
terms of this Agreement, to the lesser amount of (a) the actual damages
sustained by the Trust (actual damages for uninvested funds shall be the
overnight Feds fund rate), or (b) one-half of the net fees paid to the Custodian
within the prior year. The Custodian shall be entitled to rely on and may act
upon advice of counsel on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the Custodian
pursuant to advice of counsel. The Custodian shall not be under any obligation
at any time to ascertain whether the Trust is in compliance with the 1940 Act,
the regulations thereunder, the provisions of the Trust's charter documents or
by-laws, or the Funds' investment objectives and policies as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable
for, or considered to be the custodian of, any cash belonging to the Funds or
any money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any property or evidence
of title thereto received or delivered by it pursuant to this Agreement.
9
<PAGE>
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Funds if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 COOPERATION. The Custodian shall cooperate with and supply
necessary information, by the Funds, to the entity or entities appointed by the
Trust to keep the books of account of the Funds and/or compute the value of the
assets of the Funds. The Custodian shall take all such reasonable actions as
the Trust may from time to time request to enable the Trust to obtain, from year
to year, favorable opinions from the Trust's independent accountants with
respect to the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's report on Form N-1A and Form N-SAR and any other
reports required by the Securities and Exchange Commission, and (b) the
fulfillment by the Trust of any other requirements of the Securities and
Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.
10
<PAGE>
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the
date first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by
the Board of Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of termination (a)
deliver directly to the successor custodian all Securities (other than
Securities held in a Book-Entry System or Securities Depository) and cash then
owned by the Funds and held by the Custodian as custodian, and (b) transfer any
Securities held in a Book-Entry System or Securities Depository to an account of
or for the benefit of the Funds at the successor custodian, provided that the
Funds shall have paid to the Custodian all fees, expenses and other amounts to
the payment or reimbursement of which it shall then be entitled. Upon such
delivery and transfer, the Custodian shall be relieved of all obligations under
this Agreement. The Trust may at any time immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Trust at such bank or trust company all Securities of the
Funds held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 10.3, then Custodian shall have the
right to deliver to the Trust all Securities and cash then owned by the Funds
and to transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Funds. Thereafter, the Trust shall be
deemed to be its own custodian with respect to the Funds and the Custodian shall
be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time
to time by the Trust and the Custodian. The fees and other charges in effect on
the date hereof and applicable to the Funds are set forth in Exhibit B attached
hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of Delaware, to
which reference is hereby made a copy of which is on file at the office of the
Secretary of State of Delaware as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of the Trust entered into
in the name of a Fund or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such capacities, and are
not binding upon any of the Trustees, officers, employees, agents or
shareholders Trust personally, but bind only the assets of such Fund, and all
persons dealing with any of the Funds must look solely to the assets of such
Fund for the enforcement of any claims against such Fund.
11
<PAGE>
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to The receipt at the address set forth after its name herein
below:
TO THE TRUST:
Stonebridge Funds Trust
1801 Century Park East, Suite 1800
Los Angles, California 90069
Attn: Debra L. Newman
Telephone: (310) 277-1450
Facsimile: (310) 277-1456
TO THE CUSTODIAN:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Fund Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any
printed matter which contains any reference to Custodian without the prior
written approval of Custodian, excepting printed matter contained in the
prospectus or statement of additional information or its registration statement
for the Trust and such other printed matter as merely identifies Custodian as
custodian for the Funds. The Trust shall submit printed matter requiring
approval to Custodian in draft form, allowing sufficient time for review by
Custodian and its counsel prior to any deadline for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
12
<PAGE>
14.6 SEVERABILITY. If any provision of this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: STONEBRIDGE FUNDS TRUST
By:
- --------------------- ---------------------------------
Its:
---------------------------------
ATTEST: THE FIFTH THIRD BANK
By:
- --------------------- ---------------------------------
Its:
---------------------------------
13
<PAGE>
Dated: _____________, 1998
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
STONEBRIDGE FUNDS TRUST AND THE FIFTH THIRD BANK
______________, 1998
NAME OF FUND DATE
Stonebridge Aggressive Growth Fund ______________, 1998
Stonebridge Growth Fund _______________, 1998
STONEBRIDGE FUNDS TRUST
By:
--------------------------------
Its:
--------------------------------
THE FIFTH THIRD BANK
By:
--------------------------------
Its:
--------------------------------
14
<PAGE>
Dated: _____________, 1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
STONEBRIDGE FUNDS TRUST AND THE FIFTH THIRD BANK
_____________, 1998
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to Administer each Custody Account.
NAME SIGNATURE
RICHARD C. BARRETT
- ----------------------------------- -------------------------------
DEBRA L. NEWMAN
- ----------------------------------- -------------------------------
CRAIG B. BURGER
- ----------------------------------- -------------------------------
CHARLES E. WOODHOUSE
- ----------------------------------- -------------------------------
JAMES V. HYATT
- ----------------------------------- -------------------------------
- ----------------------------------- -------------------------------
- ----------------------------------- -------------------------------
- ----------------------------------- -------------------------------
15
<PAGE>
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of STONEBRIDGE FUNDS TRUST and any
of them, namely the Chairman, President, Vice President, Secretary and
Treasurer, are hereby authorized as signers for the conduct of business for an
on behalf of the Fund with THE FIFTH THIRD BANK:
CHAIRMAN
- ------------------------- ------------------------
PRESIDENT
- ------------------------- ------------------------
VICE PRESIDENT
- ------------------------- ------------------------
VICE PRESIDENT
- ------------------------- ------------------------
VICE PRESIDENT
- ------------------------- ------------------------
VICE PRESIDENT
- ------------------------- ------------------------
TREASURER
- ------------------------- ------------------------
SECRETARY
- ------------------------- ------------------------
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
ASSISTANT TREASURER
- ------------------------- -------------------------
The undersigned officers of the Trust certify that the foregoing is within the
parameters of a Resolution adopted by Trustees of the Trust in a meeting held
______________, 1998, directing and authorizing preparation of documents and to
do everything necessary to effect the Custody Agreement between STONEBRIDGE
FUNDS TRUST and THE FIFTH THIRD BANK.
STONEBRIDGE FUNDS TRUST
By:
--------------------------------
Its:
--------------------------------
By:
--------------------------------
Its:
--------------------------------
16
<PAGE>
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
STONEBRIDGE FUNDS TRUST AND THE FIFTH THIRD BANK
_____________, 1998
MUTUAL FUND CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
FUND SIZE:
Less than $50MM $
$50MM - $99MM $
$100MM - $199MM $
$200MM - $349MM $
Greater than $350MM $
TRANSACTION FEES
DTC/FED Eligible Trades $
DTC/FED Ineligible Trades $
Amortized Security Trades $
Repurchase Agreements (purchase and maturity) $
Third Party Repo's (purchase and maturity) $
Physical Commercial Paper Trades $
(purchase and maturity)
Book-Entry Commercial Paper Trades $
(purchase and maturity)
Options, each transaction $
Amortized Security Receipts $
A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repo's).
MISCELLANEOUS FEES
Wire Transfers & Check Disbursements $
Depository/Transfer Agent Reject $
17
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
between
ALPS MUTUAL FUNDS SERVICES, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
ALPS MUTUAL FUNDS SERVICES, INC.
AND
STATE STREET BANK AND TRUST COMPANY
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. Terms of Appointment and Duties . . . . . . . . . . . . . . . . . . . . 1
2. Third Party Administrators for Defined Contribution Plans . . . . . . . 4
3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Representations and Warranties of the Bank . . . . . . . . . . . . . . 5
5. Representations and Warranties of the Transfer Agent . . . . . . . . . 5
6. Wire Transfer Operating Guidelines . . . . . . . . . . . . . . . . . . 6
7. Data Access and Proprietary Information . . . . . . . . . . . . . . . . 7
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . .10
10. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
12. Covenants of the Transfer Agent and the Bank . . . . . . . . . . . . .11
13. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . .11
14. Assignment and Third Party Beneficiaries . . . . . . . . . . . . . . .11
15. Subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
16. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
</TABLE>
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ______ day of __________________, 1998, by and between
ALPS MUTUAL FUNDS SERVICES, INC., a Colorado corporation, having its principal
office and place of business at 370 17th Street, Suite 3 100, Denver, Colorado
80202 (the "Transfer Agent"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Transfer Agent has been appointed by the investment company
(including each series thereof) listed on Schedule A (the "Trust"), an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended, as transfer agent, dividend disbursing agent
and shareholder servicing agent in connection with certain activities, and the
Transfer Agent has accepted each such appointment;
WHEREAS, the Transfer Agent has entered into a Transfer Agency and Service
Agreement with the Trust (including each series thereof) listed on Schedule A
pursuant to which the Transfer Agent is responsible for certain transfer agency
and dividend disbursing functions and the Transfer Agent is authorized to
subcontract for the performance of its obligations and duties thereunder in
whole or in part with the Bank;
WHEREAS, the Transfer Agent is desirous of having the Bank perform certain
shareholder accounting, administrative and servicing function (collectively
"Shareholder and Record-Keeping Services");
WHEREAS, the Transfer Agent desires to appoint the Bank as its agent, and the
Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES
1.1 SUB-TRANSFER AGENCY SERVICES. Subject to the terms and conditions set
forth in this Agreement, the Transfer Agent hereby employs and appoints
the Bank to act as, and the Bank agrees to act as, the agent of the
Transfer Agent for the shares of the Trust in connection with any
accumulation, open-account, retirement plans or similar plan provided to
the shareholders of each Fund ("Shareholders") and set out in the
currently effective prospectus and statement of additional information
("prospectus") of the Trust, including without limitation any periodic
investment plan or periodic withdrawal program. As used herein, the term
"Shares" means the authorized and issued shares of common stock, or
shares of beneficial interest, as the case may be, for the Trust
(including each series thereof) enumerated in Schedule A. The Bank agrees
that it will perform the following Shareholder and Record-Keeping
services:
(a) In accordance with procedures established from time to time by
agreement between the Transfer Agent and the Bank, the Bank shall:
<PAGE>
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Trust authorized by the
Board of Trustees of the Trust (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) In respect to the transactions in items (i) (11) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Funds who shall thereby be
deemed to be acting on behalf of the Trust;
(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Trust;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Trust, and the Bank at its
option, may issue replacement certificates in place of
mutilated stock certificates upon presentation thereof and
without such indemnity;
(ix) Maintain records of account for and advise the Trust and
its Shareholders as to the foregoing; and
(x) Record the issuance of Shares of the Trust and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of Shares of the Trust which are authorized, based
upon data provided to it by the Trust, and issued and
outstanding. The Bank shall also provide the Trust on a
regular basis with the total number of Shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares,
which functions shall be the sole responsibility of the
Trust.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in
contravention of, the
<PAGE>
services set forth in the above paragraph, the Bank shall perform the
following services:
(a) OTHER CUSTOMARY SERVICES. Perform the customary services of a
transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing
Shareholder proxies, Shareholder reports and prospectuses to
current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information.
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). Maintain a daily
record and produce a daily report for the Trust of all
transactions and receipts and disbursements of money and
securities and deliver a copy of such report for the Trust for
each business day to the Trust no later than 9:00 AM Eastern Time,
or such earlier time as the Trust may reasonably require, on the
next business day;
(c) "BLUE SKY" REPORTING. The Trust or Transfer Agent shall (i)
identify to the Bank in writing those transactions and assets to
be treated as exempt from blue sky reporting for each State and
(ii) verify the establishment of transactions for each State on
the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of the Bank for the
Trust's blue sky State registration status is solely limited to
the initial establishment of transactions subject to blue sky
compliance by the Trust and providing a system which will enable
the Trust to monitor the total number of Shares sold in each
State;
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC"). (i) accept
and effectuate the registration and maintenance of accounts
through Networking and the purchase, redemption, transfer and
exchange of shares in such accounts through Fund/SERV (networking
and Fund/SERV being programs operated by the NSCC on behalf of
NSCC's participants, including the Fund), in accordance with,
instructions transmitted to and received by the Bank by
transmission from NSCC on behalf of broker-dealers and banks which
have been established by, or in accordance with the instructions
of authorized persons, as hereinafter defined on the dealer file
maintained by the Bank; (ii) issue instructions to Trust's banks
for the settlement of transactions between the Trust and NSCC
(acting on behalf of its broker-dealer and bank participants);
(iii) provide account and transaction information from the
affected Trust's records on DST Systems, Inc. computer system
TA2000 ("TA2000 System") in accordance with NSCC's Networking and
Fund/DERV rules for those broker-dealers; and (iv) maintain
Shareholder accounts on TA2000 System through Networking.
<PAGE>
(e) NEW PROCEDURES. New procedures as to who shall provide certain of
these services in SECTION I may be established from time to time
by agreement between the Transfer Agent and the Bank. The Bank may
at times perform only a portion of these services and the Transfer
Agent, the Trust or their agent may perform these services on the
Trust's behalf.
2. THIRD PARTY ADMINISTRATORS FOR DEFINED CONTRIBUTION PLANS
2.1 The Trust may decide to make available to certain of its customers, a
qualified plan program (the "Program") pursuant to which the customers
("Employers") may adopt certain plans of deferred compensation ("Plan or
Plans") for the benefit of the individual Plan participant (the "Plan
Participant"), such Plan(s) being qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended ("Code") and administered by
third party administrators which may be plan administrators as defined in
the Employee Retirement Income Security Act of 1974, as amended)(the
"TPA(s)")
2.2 In accordance with the procedures established in the initial Schedule 2.1
entitled "Third Party Administrator Procedures", as may be amended by the
Bank and the Trust from time to time ("Schedule 2. 1"), the Bank shall:
(a) Treat Shareholder accounts established by the Plans in the name of
the Trustees, Plans or TPAs as the case may be as omnibus
accounts;
(b) Maintain omnibus accounts on its records in the name of the TPA or
its designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under SECTION I on behalf of the Trust and
not as a record-keeper for the Plans.
2.3 Transactions identified under SECTION 2 of this Agreement shall be deemed
exception services ("Exception Services") when such transactions:
(a) Require the Bank to use methods and procedures other than
those usually employed by the Bank to perform services
under SECTION 1 of this Agreement;
(b) Involve the provision of information to the Bank after the
commencement of the nightly processing cycle of the TA2000
System; or
(c) Require more manual intervention by the Bank, either in
the entry of data or in the modification or amendment of
reports generated by the TA2000 System than is usually
required by non-retirement plan and pre-nightly
transactions.
3. FEES AND EXPENSES
3.1 FEE SCHEDULE. For the performance by the Bank pursuant to this Agreement,
the Transfer Agent agrees to pay the Bank an annual maintenance fee for
each Shareholder account as set out in the initial fee schedule attached
hereto. Such fees and out-of-pocket expenses and advances identified
under Section 3.2 below may be changed from time to time subject to
mutual written agreement between the Transfer Agent and the Bank.
<PAGE>
3.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under Section 3.1
above, the Transfer Agent agrees to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Bank for the items set out
in the fee schedule attached hereto. In addition, any other expenses
incurred by the Bank at the request or with the consent of the Transfer
Agent, will be reimbursed by the Fund.
3.3 POSTAGE. Postage for mailing of dividends, proxies, reports and other
mailings to all shareholder accounts shall be advanced to the Bank by the
Transfer Agent at least seven (7) days prior to the mailing date of such
materials.
3.4 INVOICES. The Transfer Agent agrees to pay all fees and reimbursable
expenses within thirty days following the receipt of the respective
billing notice.
4. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Transfer Agent that:
4.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4.6 It is duly registered as a transfer agent under the Securities Exchange
Act of 1934 or exempt from any such registration requirement.
5. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Bank that:
5.1 It is a corporation duly organized and existing and in good standing
under the laws of the State of Colorado.
5.2 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
5.3 The Board of Directors has duly authorized it to enter into and perform
this Agreement.
<PAGE>
5.4 The Trust is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as amended is
currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Trust being offered
for sale.
6. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL
CODE
6.1 The Bank is authorized to promptly debit the appropriate Transfer Agent
account(s) upon the receipt of a payment order in compliance with the
selected security procedure (the "Security Procedure") chosen for funds
transfer and in the amount of money that the Bank has been instructed to
transfer. The Bank shall execute payment orders in compliance with the
Security Procedure and with the Transfer Agent instructions on the
execution date provided that such payment order is received by the
customary deadline for processing such a request, unless the payment
order specifies a later time. All payment orders and communications
received after this the customary deadline will be deemed to have been
received the next business day.
6.2 The Transfer Agent acknowledges that the Security Procedure it has
designated on the Transfer Agent Selection Form was selected by the
Transfer Agent from security procedures offered by the Bank. The Transfer
Agent shall restrict access to confidential information relating to the
Security Procedure to authorized persons as communicated to the Bank in
writing. The Transfer Agent must notify the Bank immediately if it has
reason to believe unauthorized persons may have obtained access to such
information or of any change in the Transfer Agent's authorized
personnel. The Bank shall verify the authenticity of all Transfer Agent
instructions according to the Security Procedure.
6.3 The Bank shall process all payment orders on the basis of the account
number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number,
the account number shall take precedence and govern.
6.4 The Bank reserves the right to decline to process or delay the processing
of a payment order which (a) is in excess of the collected balance in the
account to be charged at the time of the Bank's receipt of such payment
order; (b) if initiating such payment order would cause the Bank, in the
Bank's sole judgment, to exceed any volume, aggregate dollar, network,
time, credit or similar limits which are applicable to the Bank; or (c)
if the Bank, in good faith, is unable to satisfy itself that the
transaction has been properly authorized.
6.5 The Bank shall use reasonable efforts to act on all authorized requests
to cancel or amend payment orders received in compliance with the
Security Procedure provided that such requests are received in a timely
manner affording the Bank reasonable opportunity to act. However, the
Bank assumes no liability if the request for amendment or cancellation
cannot be satisfied.
<PAGE>
6.6 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the payment
order instructions as received and the Bank complies with the Security
Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
6.7 The Bank shall assume no responsibility for lost interest with respect to
the refundable amount of any unauthorized payment order, unless the Bank
is notified of the unauthorized payment order within thirty (30) days of
notification by the Bank of the acceptance of such payment order. In no
event (including failure to execute a payment order) shall the Bank be
liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
6.8 When the Transfer Agent initiates or receives Automated Clearing House
credit and debit entries pursuant to these guidelines and the rules of
the National Automated Clearing House Association and the New England
Clearing House Association, the Bank or its bank will act as an
Originating Depository Financial Institution and/or receiving depository
Financial Institution, as the case may be, with respect to such entries.
Credits given by the Bank with respect to an ACH credit entry are
provisional until the Bank receives final settlement for such entry from
the Federal Reserve Bank. If the Bank does not receive such final
settlement, the Transfer Agent agrees that the Bank shall receive a
refund of the amount credited to the Transfer Agent in connection with
such entry, and the party making payment to the Transfer Agent via such
entry shall not be deemed to have paid the amount of the entry.
6.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within twenty four (24) hours notice of which may be delivered
through the Bank's proprietary information systems, or by facsimile or
call-back. Transfer Agent must report any objections to the execution of
an order within thirty (30) days.
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Transfer Agent acknowledges that the data bases, computer programs,
screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Transfer Agent by the Bank as part
of the Trust's ability to access certain Trust-related data ("Customer
Data") maintained by the Bank on data bases under the control and
ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the
Bank or other third party. In no event shall Proprietary Information be
deemed Customer Data. The Transfer Agent agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it shall
not divulge any Proprietary Information to any person or organization
except as may be provided hereunder. Without limiting the foregoing, the
Transfer Agent agrees for itself and its employees and agents to:
(a) Use such programs and databases (i) solely on the Transfer Agent's
computers, or (ii) solely from equipment at the location agreed to
between the Bank and the Transfer Agent and (iii) solely in
accordance with the Bank's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in the
normal course or performing processing on the Transfer Agent's
computer(s)), the Proprietary Information;
<PAGE>
(c) Refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) Refrain from causing or allowing information transmitted from the
Bank's computer to the Transfer Agent's terminal to be
retransmitted to any other computer terminal or other device
except as expressly permitted by the Bank (such permission not to
be unreasonably withheld);
(e) Allow the Transfer Agent to have access only to those authorized
transactions as agreed between the Bank and the Transfer Agent;
and
(f) Honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
7.2 Proprietary Information shall not include all or any portion of any of
the foregoing items that: (i) are or become publicly available without
breach of this Agreement; (ii) are released for general disclosure by a
written release; or (iii) are already in the possession of the receiving
party at the time or receipt without obligation of confidentiality or
breach of this Agreement.
7.3 The Transfer Agent acknowledges that its obligation to protect the Bank's
Proprietary Information is essential to the business interest of the Bank
and that the disclosure of such Proprietary Information in breach of this
Agreement would cause the Bank immediate, substantial and irreparable
harm, the value of which would be extremely difficult to determine.
Accordingly, the parties agree that, in addition to any other remedies
that may be available in law, equity, or otherwise for the disclosure or
use of the Proprietary Information in breach of this Agreement, the Bank
shall be entitled to seek and obtain a temporary restraining order,
injunctive relief, or other equitable relief against the continuance of
such breach.
7.4 If the Transfer Agent notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently
issued user documentation for such services, the Bank shall endeavor in a
timely manner to correct such failure. Organizations from which the Bank
may obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Transfer Agent agrees
to make no claim against the Bank arising out of the contents of such
third-party data, including, but not limited to, the accuracy thereof.
DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS
AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.5 If the transactions available to the Transfer Agent include the ability
to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event the Bank shall be
entitled to rely on the validity and authenticity of such instruction
<PAGE>
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by the Bank
from time to time.
7.6 Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this SECTION 7. The obligations of this Section
shall survive any earlier termination of this Agreement.
8. INDEMNIFICATION
8.1 The Bank shall not be responsible for, and the Transfer Agent shall
indemnify and hold the Bank, harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to
be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful
misconduct;
(b) The Transfer Agent's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or
warranty of the Transfer Agent hereunder;
(c) The reliance upon, and any subsequent use of or action taken or
omitted, by the Bank, or its agents or subcontractors on: (i) any
information, records, documents, data, stock certificates or
services, which are received by the Bank or its agents or
subcontractors by machine readable input, facsimile, CRT data
entry, electronic instructions or other similar means authorized
by the Transfer Agent, and which have been prepared, maintained or
performed by the Transfer Agent or the Trust or any other person
or firm on behalf of the Transfer Agent or the Trust including but
not limited to any previous transfer agent or registrar; (ii) any
instructions or requests of the Transfer Agent or the Trust or any
of its officers; (iii) any instructions or opinions of legal
counsel with respect to any matter arising in connection with the
services to be performed by the Bank under this Agreement which
are provided to the Bank after consultation with such legal
counsel; or (iv) any paper or document reasonably believed to be
genuine, authentic, or signed by the proper person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other
determination or ruling by any federal or any state agency with
respect to the offer or sale of such Shares;
(e) The negotiation and processing of any checks including without
limitation for deposit into the Trust's demand deposit account
maintained at the Bank; or
(f) Upon the Trust's request entering into any agreements required by
the National Securities Clearing Corporation (the "NSCC") required
by the NSCC for the transmission of Trust or Shareholder data
through the NSCC clearing systems.
8.2 In order that the indemnification provisions contained in this Section 8
shall apply, upon the assertion of a claim for which the Transfer Agent
may be required to indemnify the Bank, the Bank shall promptly notify the
Transfer Agent of such assertion, and shall keep the Transfer Agent
advised with respect to all developments concerning such claim. The
Transfer Agent shall have the option to participate with the Bank in the
defense of such
<PAGE>
claim or to defend against said claim in its own name or in the name of
the Bank. The Bank shall in no case confess any claim or make any
compromise in any case in which the Transfer Agent may be required to
indemnify the Bank except with the Transfer Agent's prior written
consent.
9. STANDARD OF CARE
9.1 The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees, except as provided in Section 9.2 below.
9.2 In the case of Exception Services as defined in SECTION 2.3 herein, the
Bank shall be held to a standard of gross negligence and encoding and
payment processing errors shall not be deemed negligence.
10. YEAR 2000
The Bank will take reasonable steps to ensure that its products (and
those of its thirdparty suppliers) reflect the available technology to
offer products that are Year 2000 ready, including, but not limited to,
century recognition of dates, calculations that correctly compute same
century and multi century formulas and date values, and interface values
that reflect the date issues arising between now and the next one-hundred
years, and if any changes are required, the Bank will make the changes to
its products at a price to be agreed upon by the parties and in a
commercially reasonable time frame and will require third-party suppliers
to do likewise.
11. CONFIDENTIALITY
11.1 The Bank and the Transfer Agent agree that they will not, at any time
during the term of this Agreement or after its termination, reveal,
divulge, or make known to any person, firm, corporations or other
business organization, any customers' lists, trade secrets, cost figures
and projections, profit figures and projections, or any other secret or
confidential information whatsoever, whether of the Bank or of the
Transfer Agent, used or gained by the Bank or the Transfer Agent during
performance under this Agreement. The Bank and the Transfer Agent further
covenant and agree to retain all such knowledge and information acquired
during and after the term of this Agreement respecting such lists, trade
secrets, or any secret or confidential information whatsoever in trust
for the sole benefit of the Bank or the Transfer Agent and their
successors and assigns. In the event of breach of the foregoing by either
party, the remedies provided by SECTION 7.3 shall be available to the
party whose confidential information is disclosed. The above prohibition
of disclosure shall not apply to the extent that the Bank must disclose
such data to its sub-contractor or Trust agent for purposes of providing
services under this Agreement.
11.3 In the event that any requests or demands are made for the inspection of
the Shareholder records of the Fund, other than request for records of
Shareholders pursuant to standard subpoenas from state or federal
government authorities (i.e., divorce and criminal actions), the Bank
will endeavor to notify the Fund and to secure instructions from an
authorized officer of the Fund as to such inspection. The Bank expressly
reserves the right, however, to exhibit the Shareholder records to any
person whenever it is
<PAGE>
advised by counsel that it may be held liable for the failure to exhibit
the Shareholder records to such person or if required by law or court
order.
12. COVENANTS OF THE TRANSFER AGENT AND THE BANK
12.1 The Transfer Agent shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors of
the Transfer Agent authorizing the Appointment of the Bank and the
execution and delivery of this Agreement.
12.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Transfer Agent for safekeeping of
stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
12.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Trust and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Trust on and in accordance with
its request.
13. TERMINATION OF AGREEMENT
13.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
13.2 Should the Transfer Agent exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be borne by the Transfer Agent. Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated
with such termination. Payment of such expenses or costs shall be in
accordance with SECTION 3.4 of this Agreement.
13.3 Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder, other than materials or
information required to be retained by such party under applicable laws
or regulations.
14. ASSIGNMENT AND THIRD PARTY BENEFICIARIES
14.1 Except as provided in SECTION 15.1 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party. Any attempt to do so in violation
of this Section shall be void. Unless specifically stated to the contrary
in any written consent to an assignment, no assignment will release or
discharge the assignor from any duty or responsibility under this
Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing under
this Agreement shall be construed to give any rights or benefits in this
Agreement to anyone other than the Bank and the Transfer Agent, and the
duties and responsibilities undertaken pursuant to this Agreement shall
be for the sole and exclusive benefit of the Bank and the Transfer Agent.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
<PAGE>
14.3 This Agreement does not constitute an agreement for a partnership or
joint venture between the Bank and the Transfer Agent. Other than as
provided in SECTION 15.1, neither party shall make any commitments with
third parties that are binding on the other party without the other
party's prior written consent.
15. SUBCONTRACTORS
15.1 The Bank may, without further consent on the part of the Transfer Agent,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(2) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)") (ii) a
BFDS subsidiary duly registered as a transfer agent pursuant to Section
17A(c)(2) or (iii) a BFDS affiliate; provided, however, that the Bank
shall be as fully responsible to the Transfer Agent for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
15.2 Nothing herein shall impose any duty upon the Bank in connection with or
make the Bank liable for the actions or omissions to act of unaffiliated
third parties such as by way of example and not limitation, Airborne
Services, Federal Express, United Parcel Service, the U.S. malls, the
NSCC and telecommunication companies, provided, if the Transfer Agent
selected such company, the Bank shall have exercised due care in
selecting the same.
16. MISCELLANEOUS
16.1 AMENDMENT. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Transfer Agent.
16.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
16.3 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond
its control, or other causes reasonably beyond its control, such party
shall not be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or
failure to act hereunder.
16.5 SURVIVAL. All provisions regarding indemnification, warranty, liability,
and limits thereon, and confidentiality and/or protections of proprietary
rights and trade secrets shall survive the termination of this Agreement.
16.6 SEVERABILITY. If any provision or provisions of this Agreement shall be
held invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
<PAGE>
16.5 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or ambiguity
between the terms and conditions contained in this Agreement and any
Schedules or attachments hereto, the terms and conditions contained in
the Schedules shall take precedence.
16.6 WAIVER. NO waiver by either party or any breach or default of any of the
covenants or conditions herein contained and performed by the other party
shall be construed as a waiver of any succeeding breach of the same or of
any other covenant or condition.
16.7 MERGER OF AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
16.8 COUNTERPARTS. This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
16.9 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits,
attachments and amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other
similar process. The parties hereto each agree that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence
and whether or not such reproduction was made by a party in the regular
course of business, and that any enlargement, facsimile or further
reproduction shall likewise be admissible in evidence.
<PAGE>
16.11 NOTICES. All notices and other communications as required or permitted
hereunder shall be in writing and sent by first class mail, postage
prepaid, addressed as follows or to such other address or addresses of
which the respective party shall have notified the other.
(a) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
------------------------------------------
------------------------------------------
Attention:
--------------------------------
Facsimile:
--------------------------------
(b) If to the Transfer Agent, to:
ALPS Mutual Funds Services, Inc.
370 17th Street, Suite 3100
Denver, CO 80202-5631
Attention: James V. Hyatt
Facsimile: (303) 623 7850
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
ALPS MUTUAL FUNDS SERVICES, INC.
BY:
--------------------------------
President
ATTEST:
----------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
--------------------------------
Executive Vice President
ATTEST:
----------------------------
<PAGE>
STATE STREET BANK & TRUST COMPANY
TRANSFER AGENT SERVICE RESPONSIBILITIES*
SERVICE PERFORMED RESPONSIBILITY
Bank Transfer Agent
1. Receives orders for the purchase X X (telephone only)
of Shares.
2. Issue Shares and hold Shares in X
Shareholders accounts.
3. Receive redemption requests. X(telephone only)
4. Effect transactions 1-3 above X
directly with broker-dealers.
5. Pay over monies to redeeming X
Shareholders.
6. Effect transfers of Shares. X
7. Prepare and transmit dividends X
and distributions.
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and X
accurate control book for each
issue of securities.
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current X
Shareholders.
15. Withhold taxes on U.S. resident X
and non-resident alien accounts.
<PAGE>
Service Performed Responsibility
BANK TRANSFER AGENT
16. Prepare and file U.S. Treasury X
Department forms.
17. Prepare and mail account and X
confirmation statements for
Shareholders.
18. Provide Shareholder account X X
information.
19. Blue sky reporting. X
*Such services are more fully described in Section 1.1 (a), (b) and (c) of the
Agreement.
ALPS MUTUAL FUNDS SERVICES, INC.
BY:
---------------------------------
President
ATTEST:
-----------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
---------------------------------
Executive Vice President
ATTEST:
-----------------------------
<PAGE>
SCHEDULE A
STONEBRIDGE FUNDS TRUST CURRENTLY CONSISTING OF TWO SERIES:
STONEBRIDGE GROWTH FUND
STONEBRIDGE AGGRESSIVE GROWTH FUND
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR PROCEDURES
Dated ________________
1. On each Business Day, the TPA(s) shall receive, on behalf of and as agent
of the Fund(s), Instructions (as hereinafter defined) from the Plan.
Instructions shall mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the redemption of
Shares; in each case based on the Plan's receipt of purchase orders and
redemption requests by Participants in proper form by the time required
by the term of the Plan, but not later than the time of day at which the
net asset value of a Fund is calculated, as described from time to time
in that Fund's prospectus. Each Business Day on which the TPA receives
Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such
Instructions, to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1),
the TPA(s) shall notify the Bank of the net amount of such purchases or
redemptions, as the case may be, for each of the Plans. In the case of
net purchases by any Plan, the TPA(s) shall instruct the Trustees of such
Plan to transmit the aggregate purchase price for Shares by wire transfer
to the Bank on TD+1. In the case of net redemptions by any Plan, the
TPA(s) shall instruct the Fund's custodian to transmit the aggregate
redemption proceeds for Shares by wire transfer to the Trustees of such
Plan on TD+1. The times at which such notification and transmission shall
occur on TD+1. shall be as mutually agreed upon by each Fund, the TPA(s)
and the Bank.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and price
for all transactions, and Share balances. The TPA(s) shall maintain on
behalf of each of the Plans a single master account with the Bank and
such account shall be in the name of that Plan, the TPA(s) or the nominee
of either thereof as the record owner of Shares owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of
Shares and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that Plan
as of the statement closing date, purchases and redemptions of Shares by
the Plan during the period covered by the statement, and the dividends
and other distributions paid to the Plan on Shares during the statement
period (whether paid in cash or reinvested in Shares).
7. The TPA(s) shall, at the request and expense of each Fund, transmit to
the Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to
each Fund or any agent designated by it such periodic reports covering
Shares of each Plan as each Fund shall reasonably conclude are necessary
to enable the Fund to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders
and redemption requests placed by the Plans; and
<PAGE>
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses,
proxy materials, periodic reports and other materials relating to each
Fund be furnished to Participants in which event the Bank or each Fund
shall mail or cause to be mailed such materials to Participants. With
respect to any such mailing, the TPA(s) shall, at the request of the Bank
or each Fund, provide at the TPA(s)'s expense complete and accurate set
of mailing labels with the name and address of each Participant having an
interest through the Plans in Shares.
ALPS MUTUAL FUNDS SERVICES, INC.
BY:
---------------------------------
President
ATTEST:
-----------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
---------------------------------
Executive Vice President
ATTEST:
-----------------------------
<PAGE>
SCHEDULE 3.1
FEES
Dated _____________
ALPS MUTUAL FUNDS SERVICES, INC.
BY:
---------------------------------
President
ATTEST:
-----------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
---------------------------------
Executive Vice President
ATTEST:
-----------------------------
<PAGE>
FUND ACCOUNTING AND SERVICES AGREEMENT
THIS AGREEMENT is made as of _______ , 1998, by and among THE FIFTH THIRD BANK,
a banking company organized under the laws of the State of Ohio ("Fifth Third"),
and STONEBRIDGE FUNDS TRUST, a business trust organized under the laws of the
State of Delaware, (the "Trust").
W I T N E S S E T H
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") with portfolios as listed in Exhibit A (the "Portfolios");
WHEREAS, Fifth Third provides certain fund accounting, administrative and
other services to investment companies; and
WHEREAS, the Trust, desires to retain Fifth Third to provide fund
accounting and other services for the Trust portfolios listed on EXHIBIT A, as
may be amended from time to time (each a "Portfolio"), and Fifth Third is
willing to provide such services, all as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
(1) DEFINITIONS, AS USED IN THIS AGREEMENT.
(a) Authorized Person means any officer of the Trust and any
other person duly authorized by the Trust's Board of Trustees to give Oral
and Written Instructions on behalf of the Trust and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by Fifth Third. An Authorized
Person's scope of authority may be limited by the Trust by setting forth
such limitation in the Authorized Persons Appendix.
(b) Oral Instructions mean instructions orally transmitted to
and accepted by Fifth Third because such instructions are: (i) given by an
Authorized Person or from a person reasonably believed by Fifth Third to
have been an Authorized Person, (ii) recorded and kept among the records of
Fifth Third made in the ordinary course of business and (iii) orally
confirmed by Fifth Third. The Trust shall cause all Oral Instructions to
be confirmed by Written Instructions. If such Written Instructions
confirming Oral Instructions are not received by Fifth Third prior to a
transaction, it shall in no way affect the validity of the transaction or
the authorization thereof by the Trust. If Oral Instructions vary from the
Written Instructions which purport to confirm them, Fifth Third shall
notify the Trust of such variance but such Oral Instructions will govern
unless Fifth Third has not yet acted.
(c) Written Instructions mean (i) written communications
actually received by Fifth Third and signed by one or more persons as the
Board of Trustees shall have from time to time authorized, or (ii)
communications by fax or any other such system from a person or persons
reasonably believed by Fifth Third to be Authorized or (iii) communications
transmitted electronically through the Institutional Delivery System (IDS),
or any other similar electronic instruction system acceptable to Fifth
Third and approved by resolutions of the Board of Trustees, a copy of
which, certified by the Secretary, shall have been delivered to Fifth
Third.
(d) Shares mean the shares of beneficial interest of either
series of the Trust.
2. APPOINTMENT. The Trust hereby appoints Fifth Third to provide fund
accounting and other specified services to each of the Portfolios set forth in
Exhibit A, as may be amended from time to time, in accordance with the terms set
forth in this Agreement. Fifth Third accepts such appointment and agrees to
furnish such specified services.
3. DELIVERY OF DOCUMENTS. The Trust has provided or, where applicable,
will provide Fifth Third with the following:
<PAGE>
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of Fifth Third or its
affiliates to provide services to each Portfolio and approving this
Agreement;
(b) a copy of the Trust's most recent effective registration
statement;
(c) a copy of the Trust's advisory agreement or agreements;
(d) a copy of any distribution agreement or similar agreement made
with respect to each class of Shares;
(e) a copy of any management agreement and any administration
agreements or similar agreements with respect to the Trust;
(f) a copy of any shareholder servicing agreement made in respect of
the Trust; and
(g) copies (certified or authenticated, where applicable) of any and
all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. Fifth Third undertakes to
comply with all applicable requirements of the Investment Company Act, and any
laws, rules and regulations of governmental authorities having jurisdiction with
respect to the duties to be performed by Fifth Third hereunder. Except as
specifically set forth herein, Fifth Third assumes no responsibility for such
compliance by the Trust or any Portfolio.
5. INSTRUCTIONS. Fifth Third will provide fund accounting and such other
services as is agreed hereunder.
(a) With respect to other services Fifth Third shall act only upon
Oral or Written Instructions.
(b) Fifth Third shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by Fifth Third to be an Authorized Person) pursuant to
this Agreement. Fifth Third may assume that any Oral or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of organizational documents or this Agreement or of any vote,
resolution or proceeding of the Trust's Board of Trustees or of the Fund's
shareholders, unless and until Fifth Third receives Written Instructions to
the contrary.
(c) The Trust agrees to forward to Fifth Third, Written Instructions
confirming Oral Instructions so that Fifth Third receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written
Instructions are not received by Fifth Third shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. Where Oral or Written Instructions reasonably appear to have
been received from an Authorized Person, Fifth Third shall incur no
liability to the Trust in acting upon such Oral or Written Instructions.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE TRUST. If Fifth Third is in doubt as to any action
it should or should not take, Fifth Third shall request directions or
advice, including Oral or Written Instructions, from the Trust.
(b) ADVICE OF COUNSEL. If Fifth Third shall be in doubt as to any
question of law pertaining to any action it should or should not take,
Fifth Third shall request advice from such counsel of its own choosing and
the Trust shall reimburse such reasonable cost.
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral or Written Instructions Fifth Third receives
from the Trust and the advice Fifth Third receives from counsel, Fifth
Third shall inform the Trust of the conflict and seek resolution.
2
<PAGE>
(d) PROTECTION OF FIFTH THIRD. Fifth Third shall be protected in any
action it takes or does not take in reliance upon directions, advice or
Oral or Written Instructions it receives from the Trust or counsel and
which Fifth Third believes, in good faith, to be consistent with those
directions, advice or Oral or Written Instructions. Nothing in this
section shall be construed so as to impose an obligation upon Fifth Third
(i) to seek such directions, advice or Oral or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral or Written
Instructions unless, under the terms of other provisions of this Agreement.
Nothing in this subsection shall excuse Fifth Third when an action or
omission on the part of Fifth Third constitutes willful misfeasance, lack
of good faith, or reckless disregard by Fifth Third of its duties,
obligation or responsibilities set forth in this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Trust and the Portfolios
which are in the possession or under the control of Fifth Third shall be
the property of the Trust. Such books and records shall be prepared,
maintained and preserved as required by the Investment Company Act and
other applicable Securities Laws, rules and regulations. The Trust and
Authorized Persons shall have access to such books and records at all times
during Fifth Third's normal business hours. Upon the reasonable request of
the Trust, copies of any such books and records shall be provided by Fifth
Third to the Trust or to an Authorized Person, at the Trust's expense.
(b) Fifth Third shall keep the following records:
(i) all books and records relating to the services it performs
hereunder with respect to a Portfolio's books of account;
(ii) records relating to the services it performs hereunder
with respect to a Portfolio's securities transactions; and
(iii) all other books and records as Fifth Third is required to
maintain pursuant to Rule 31a-1 of the Investment Company Act in
connection with the services provided hereunder.
8. CONFIDENTIALITY. Fifth Third agrees to keep confidential all records
of the Trust and information relating to the Trust and its shareholders (past,
present and future), unless the release of such records of information is
otherwise consented to, in writing, by the Trust. The Trust agrees that such
consent shall not be unreasonably withheld and may not be withheld where Fifth
Third may be exposed to civil or criminal contempt proceedings or when required
to divulge such information or records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. Fifth Third shall act as liaison with the
Trust's independent public accountants and shall provide account analysis,
fiscal year summaries, and other audit-related schedules with respect to the
services provided to each Portfolio. Fifth Third shall take all reasonable
action in the performance of its duties under this Agreement to assure that the
necessary information in Fifth Third's control is made available to such
accountants for the expression of their opinion, as required by the Trust.
10. DISASTER RECOVERY. Fifth Third shall maintain in effect a disaster
recovery plan, and enter into any agreement necessary with appropriate parties
making reasonable provisions for emergency use of electronic data processing
equipment customary in the industry. In the event of equipment failures, Fifth
Third shall, at no additional expense to the Trust, take reasonable steps to
minimize service interruptions. Fifth Third shall have no liability with
respect to the loss of data or service interruptions caused by equipment failure
provided such loss or interruption is not caused by Fifth Third's own willful
misfeasance or gross negligence.
11. COMPENSATION. As compensation for services rendered by Fifth Third
during the term of this Agreement, the Trust will pay to Fifth Third a fee or
fees set forth in Exhibit B, as may be amended from time to time. It is agreed
that fees set forth in Exhibit B may be increased with not less than ninety (90)
days written notice. In the event that Exhibit C is amended such that
additional services as requested by the Trust are required from Fifth Third on
an ongoing basis, with the approval of the Trust, additional fees may be charged
as applicable. The fee for the period from the day of the year this Agreement
is entered into until the end of that year shall be prorated according to the
proportion that such period bears to the full annual period.
3
<PAGE>
12. INDEMNIFICATION.
(a) The Trust agrees to indemnify and hold harmless Fifth Third and
its agents or subcontractor from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, liabilities arising
under the Securities Laws and any state or foreign securities and blue sky
laws, and amendments thereto), and expenses, including (without limitation)
attorneys' fees and disbursements arising directly or indirectly from any
action or omission to act which Fifth Third takes in reasonable reliance on
Oral or Written Instructions from the Trust. Fifth Third, shall not be
indemnified against any liability (or any expenses incident to such
liability) arising out of Fifth Third's own willful misfeasance, lack of
good faith or reckless disregard of its duties and obligations under this
Agreement. For any legal proceedings giving rise to this indemnification,
the Trust shall be entitled to defend or prosecute any claim in the name
of Fifth Third at the Trust's own expense through counsel of its own
choosing if it gives written notice to Fifth Third within ten (10) business
days of receiving notice of such claim.
(b) Fifth Third agrees to indemnify and hold harmless the Trust from
all taxes, charges, expenses, assessments, claims and liabilities
(excluding, liabilities arising under the Securities Laws and any state or
foreign securities and blue sky laws, and amendments thereto), and
expenses, including (without limitation) attorneys' fees and disbursements
arising directly from any action or omission of Fifth Third's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement. For any legal proceedings
giving rise to this indemnification, Fifth Third shall be entitled to
defend or prosecute any claim in the name of the Trust at Fifth Third's own
expense through counsel of its own choosing if it gives written notice to
the Trust within ten (10) business days of receiving notice of such claim.
13. RESPONSIBILITIES OF FIFTH THIRD.
(a) Fifth Third shall be under no duty to take any action on behalf
of the Trust or any Portfolio except as specifically set forth herein or as
may be specifically agreed to by Fifth Third in writing. Fifth Third shall
be obligated to exercise commercially reasonable care and diligence in the
performance of its duties hereunder, to act in good faith and act within
reasonable limits, in performing services provided for under this
Agreement. Fifth Third shall only be liable for actual damages arising out
of Fifth Third's failure to perform its duties under this Agreement to the
extent such damages arise out of Fifth Third's willful misfeasance, bad
faith, gross negligence or reckless disregard of such duties.
(b) In no event shall Fifth Third be liable for any special,
consequential, extraordinary or punitive damages, arising from the
performance or non-performance of Fifth Third under this Agreement, or
Fifth Third's failure to comply with any of the terms of this Agreement.
Fifth Third 's cumulative liability within a calendar year shall be limited
to the Trust or any party claiming by, through or on behalf of the Trust
for the initial and all subsequent renewal terms of this Agreement, to the
lesser of (a) the actual damages sustained by the Trust; or (b) one-half of
the net fees paid to Fifth Third, but not to exceed one half of the net
fees paid to Fifth Third within the prior twelve calendar months as in
accordance with Agreement.
(c) Without limiting the generality of the foregoing or of any other
provision of this Agreement,
(i) Fifth Third shall not be liable for losses beyond its
reasonable control, provided that Fifth Third has acted in
accordance with the standard of care set forth above; and
(ii) Fifth Third shall not be liable for:
(A) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this
Agreement, and which Fifth Third reasonably believes to be
genuine; or
(B) subject to Section 10, delays or errors or loss of
data occurring by reason of circumstances beyond Fifth Third's
control, including acts of civil or military authority, national
emergencies, non-Fifth Third labor difficulties, fire, flood,
catastrophe, acts of God,
4
<PAGE>
insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS. Fifth Third
will perform accounting services as deemed industry standard and/or agreed upon
with Customer at the time of conversion.
15. DESCRIPTION OF OTHER SERVICES ON A CONTINUOUS BASIS. Fifth Third will
perform other services at the request of the Customer, documented previous to
conversion.
16. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either the Trust or Fifth Third on ninety (90) days' prior written
notice to the other party.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered. Notices shall
be addressed
(a) if to Fifth Third:
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Fund Accounting Manager
(b) if to the Trust:
1801 Century Park East, Suite 1800
Los Angles, California 90067
Attn: Stonebridge Funds
(c) if to none of the foregoing, at such other address as shall have
been provided by like notice to the sender of any such notice or other
communication by the receiving party.
18. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. Fifth Third may assign its rights and
delegate its duties hereunder upon prior written consent of the Trust to any
wholly-owned direct or indirect subsidiary of Fifth Third, provided that:
(a) Fifth Third gives the Trust sixty (60) days' prior written
notice;
(b) the delegate (or assignee) agrees with Fifth Third and the Trust
to comply with all relevant provisions of the Securities Laws; and
(c) Fifth Third and such delegate (or assignee) promptly provide such
information as the Trust may request, and respond to such questions as the
Trust may ask, relative to the delegation (or assignment), including
(without limitation) the capabilities of the delegate (or assignee).
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
5
<PAGE>
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding among the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
Fund and Fifth Third may embody in one or more separate documents their
agreement, if any, with respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
(c) GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of Ohio without regard to principles
or conflicts of law. The parties agree that venue for any action or
proceeding brought pursuant to this Agreement shall be in the state or
federal courts located in the State of Ohio.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and biding execution hereof by
such party.
(g) DECLARATION OF TRUST. Fifth Third acknowledges that the
Declaration of Trust of the Trust provides that the obligations of the Trust
under this Agreement are not binding on any officers, trustees or shareholders
of the Trust individually, but are binding only upon the assets and properties
of the various Portfolios. Fifth Third further acknowledges and agrees that its
liabilities, obligations and expenses incurred hereunder with respect to a
particular Portfolio shall be enforceable against the assets and property of
such Portfolio only, and not against the assets or property of the other
Portfolio or any other series of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE FIFTH THIRD BANK STONEBRIDGE FUNDS TRUST
By: By:
-------------------------- ------------------------------
Its: Its:
-------------------------- ------------------------------
6
<PAGE>
EXHIBIT A
PORTFOLIOS OF TRUST
THIS EXHIBIT A, dated as of ______________, 1998, is Exhibit A to the Fund
Accounting and Services Agreement dated as of ________________, 1998 by and
among the Fifth Third Bank and the Trust. This Exhibit A shall supersede all
previous forms of Exhibit A.
STONEBRIDGE AGRESSIVE GROWTH FUND
STONEBRIDGE GROWTH FUND
THE FIFTH THIRD BANK STONEBRIDGE FUNDS TRUST
By: By:
-------------------------- ------------------------------
Its: Its:
-------------------------- ------------------------------
7
<PAGE>
EXHIBIT B
FEE SCHEDULE
THIS EXHIBIT B, dated as of ______________, 1998, is Exhibit B to the Fund
Accounting and Services Agreement dated as of ________________, 1998 by and
among the Fifth Third Bank and the Trust for each Portfolio. This Exhibit B
shall supersede all previous forms of Exhibit B.
The Trust will pay Fifth Third an annual fund accounting and service fee (the
"Fee"), to be calculated daily and paid monthly. The annual Fee for each
Portfolio shall be an asset based fee, exclusive of out-of-pocket expenses, with
a minimum monthly payment as set forth below:
<TABLE>
<CAPTION>
Asset Monthly Additional Other Services
Based Fees Minimum Class Monthly Monthly
---------- ------- ------------- -------
<S> <C> <C> <C> <C>
FUNDS
</TABLE>
The Trust will also reimburse Fifth Third for its out-of-pocket expenses
incurred in performing its services under this Agreement, including, but not
limited to: postage and mailing, telephone, telex, overnight courier services
and outside independent pricing service charges, and record retention/storage.
THE FIFTH THIRD BANK STONEBRIDGE FUNDS TRUST
By: By:
-------------------------- ------------------------------
Its: Its:
-------------------------- ------------------------------
8
<PAGE>
EXHIBIT C
FIFTH THIRD WILL PERFORM THE ACCOUNTING SERVICES WITH RESPECT TO EACH PORTFOLIO:
(a) Journalize investment, capital share and income and expense activities;
(b) Verify investment buy/sell trade tickets when received from the investment
adviser for a Portfolio (the "Money Manager") and transmit trades to the Fund's
custodian (the "Custodian") for proper settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain historical tax lots for each security;
(e) Reconcile cash and investment balances with the Custodian, and provide the
Money Manager with the beginning cash balance available for investment purposes;
(f) Update the cash availability daily;
(g) Post to and prepare the Statement of Assets and Liabilities and the
Statement of Operations;
(h) Calculate the various contractual expenses (e.g., advisory and custody
fees);
(i) Monitor the expense accruals and notify an officer of the Trust of any
proposed adjustments;
(j) Control all disbursements and authorize such disbursements upon Written
Instructions;
(k) Calculate capital gains and losses and only upon Written Instructions from
the Trust transmit such information to the Trust's transfer agent (or other
agreed upon procedures);
(l) Determine net income;
(m) Obtain security market quotes from independent pricing services, if
available, approved by the Money Manager, or if such quotes are unavailable,
then obtain such prices from the Money manager, and in either case calculate the
market value of each Portfolio's investments;
(n) Transmit or mail a copy of the daily portfolio valuation to the Money
Manager;
(o) Compute net asset value;
(p) As appropriate, compute yields, total return, expense ratios, portfolio
turnover rate, and, if required, portfolio average dollar-weighted maturity; and
(q) Prepare a monthly financial statement, which will include the following
items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
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