As filed with the Securities and Exchange Commission on May 1, 2000
Registration No. 33-7190
Investment Company Act File No. 811-4750
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Post-Effective Amendment No. 25 |X|
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 28 |X|
FENIMORE ASSET MANAGEMENT TRUST
(Exact Name of Registrant as Specified in Charter)
111 North Grand Street, P.O. Box 399, Cobleskill, N.Y. 12043
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 453-4392
Patrick W.D. Turley, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
(Name and Address of Agent for Service)
Copies to:
Thomas O. Putnam
118 North Grand Street
Cobleskill, N.Y. 12043
It is proposed that this filing will become effective immediately upon filing
pursuant to paragraph (b) of Rule 485.
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FAM
VALUE FUND
EQUITY-INCOME FUND
PROSPECTUS
MAY 1, 2000
The Securities and Exchange Commission
has not approved or disapproved these
securities or passed upon the adequacy of
this Prospectus. Any representation to the
contrary is a criminal offense.
FAM FUNDS
P.O. Box 399
Cobleskill, NY 12043
(800) 932-3271
www.famfunds.com
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FAM Funds
P.O. Box 399
Cobleskill, New York 12043
(800) 932-3271
www.famfunds.com
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TABLE OF CONTENTS
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Page
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RISK/RETURN SUMMARY AND FUND EXPENSES ..................................... 2
Investment Objectives ............................................. 2
Principal Investment Strategies ................................... 2
Principal Investment Risks ........................................ 2
Who May Want to Invest? ........................................... 3
Fund Performance .................................................. 3
Bar Charts ................................................ 3
Best Quarter / Worst Quarter .............................. 4
Performance Table ......................................... 4
Fees and Expenses of the Funds .................................... 5
Expense Example ........................................... 5
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS .......... 6
Investment Objectives ............................................. 6
Principal Investment Strategies ................................... 6
Risks ............................................................. 7
FUND MANAGEMENT ........................................................... 8
The Investment Advisor ............................................ 8
Portfolio Managers ................................................ 8
SHAREHOLDER INFORMATION ................................................... 9
Pricing Fund Shares ............................................... 9
Householding of Shareholder Mailings .............................. 9
Purchasing and Adding to Your Shares .............................. 9
Account Minimums .......................................... 10
FAMVest Automatic Investment Plan ......................... 10
Wire Instructions ......................................... 10
IRA and Retirement Accounts ............................... 11
Purchases Through Selected Dealers ........................ 12
Instructions for Redemption of Shares ............................. 12
Definition of Good Order .................................. 12
Signature Guarantees ...................................... 13
Systematic Withdrawal Plan ................................ 13
Information on Distribution and Taxes ............................. 14
Tax Information ........................................... 14
FINANCIAL HIGHLIGHTS ...................................................... 15
FAM Value Fund .................................................... 15
FAM Equity-Income Fund ............................................ 16
TO OBTAIN ADDITIONAL INFORMATION .....................................Back Cover
1
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RISK/RETURN SUMMARY AND FUND EXPENSES
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INVESTMENT OBJECTIVES
FAM Value Fund's investment objective is to maximize long-term total return
on capital.
FAM Equity-Income Fund has the investment objective of providing current
income, as well as long-term capital appreciation by investing primarily
(at least 65% of its total assets) in income-producing stocks that pay
dividends. This Fund distributes its income on a quarterly basis.
PRINCIPAL INVESTMENT STRATEGIES
Fenimore Asset Management, Inc., ("FAM" or "Fenimore") the investment
adviser to each Fund employs a `value approach' in making its common stock
selections. This approach is based on FAM's belief that at any given point
in time the stock price of a company may sell below the company's `true
business worth'. Factors considered in evaluating the true business worth
include the company's current earnings and FAM's opinion as to its future
earnings potential. After identifying a company whose securities are
determined to have a favorable price-to-earnings relationship, FAM plans to
invest in such securities until the 'true business worth' nears the market
price of the company's securities.
Some of the securities in which the Funds invest are issued by smaller and
newer companies which may not be well known to the general public or may
not have strong institutional ownership or recognition. Before investing in
these smaller companies, FAM places considerable emphasis upon evaluating
the company's management through personal conversations and/or meetings
with company officials. Conversations and meetings of this type continue
throughout FAM's interest in the company.
PRINCIPAL INVESTMENT RISKS
The principal risks of investing in the Funds are: stock market risk, stock
selection risk, and small-cap risk.
STOCK MARKET RISK refers to the fact that the value of stocks fluctuate in
response to the activities of individual companies and to general stock
market and economic conditions. As a result, the value of your investment
in either Fund will fluctuate in response to stock market conditions and
you could, therefore, lose money on your investment in a Fund or your
investment in a Fund could underperform other investments.
STOCK SELECTION RISK refers to the fact that FAM utilizes a `value
approach' to stock selection, as discussed above, and there is risk that
the stocks selected by FAM may not realize their intrinsic value, or their
price may go down over time.
SMALL-CAP RISK refers to the fact that FAM often focuses on the stocks of
smaller companies for certain of each Fund's investments. The stock prices
of these small-cap companies can fluctuate more than the stocks of larger
companies and they may not correspond to changes in the stock market in
general.
2
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RISK/RETURN SUMMARY AND FUND EXPENSES
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WHO MAY WANT TO INVEST?
Consider investing in FAM Value Fund or FAM Equity-Income Fund if you: - are
investing for long-term goals - want potential capital appreciation and are
willing to accept higher risk
associated with investing in stocks
- - want professional portfolio management
FAM Funds are not appropriate for anyone:
- - whose intention is to capitalize on short-term fluctuations, or who would
sell their Fund shares due to short-term market fluctuations
- - seeking safety of principal
AS WITH ALL MUTUAL FUNDS, THERE IS NO GUARANTEE THAT FAM VALUE FUND OR FAM
EQUITY-INCOME FUND WILL ACHIEVE ITS GOALS.
FUND PERFORMANCE
The Performance Bar Charts below show the FAM Funds' actual performance for
each calendar year since FAM Value Fund was established in 1987, and FAM
Equity-Income Fund in 1996. It indicates risk by illustrating how much
returns can differ from one year to the next. As always, keep in mind that
a Fund's past performance is no indication of what future returns will be.
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RISK/RETURN SUMMARY AND FUND EXPENSES
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BEST QUARTER/WORST QUARTER
A Fund can also experience performance swings, as shown in the following
tables which show the best and worst calendar quarter returns during the
years depicted in the chart.
FAM VALUE FUND
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Best Quarter: 1st Qtr. 1991 20.8%
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Worst Quarter: 3rd Qtr. 1990 -15.5%
FAM EQUITY-INCOME FUND
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Best Quarter: 2nd Qtr. 1997 10.7%
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Worst Quarter: 3rd Qtr. 1998 -10.0%
PERFORMANCE TABLE
This table compares the performance of each Fund to the Russell 2000 Index,
our primary comparative index which is an unmanaged index that measures the
performance of the 2,000 smallest of the 3,000 largest publicly traded U.S.
companies based on total market capitalization.
Average Annual Total Return (for the periods ending December 31, 1999)
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1 YEAR 5 YEAR 10 YEAR
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FAM Value Fund -4.8% 13.3% 13.4%
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Russell 2000 21.3% 16.7% 13.4%
SINCE
INCEPTION
1 YEAR (4/1/96)
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FAM Equity-Income Fund -7.0% 9.0%
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Russell 2000 21.3% 13.4%
4
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RISK/RETURN SUMMARY AND FUND EXPENSES
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FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you pay if you buy and hold
shares of the Funds.
* FAM has entered into a contractual expense limitation agreement with FAM
Equity-Income to limit the total operating expenses of the Fund to 1.50% of its
average daily net assets for its current fiscal year. Without this expense
limitation agreement, the total operating expenses for FAM Equity-Income would
have been 2.12%. for the year ended December 31, 1999. FAM has also entered into
a contractual expense limitation agreement with FAM Value Fund which would limit
the Fund's total operating expenses to 1.29% of its average daily net assets for
its current fiscal year. Each of these expense limitations are reviewed and
agreed upon by the board's independent trustees.
EXPENSE EXAMPLE
Use this table to compare fees and expenses of the Funds with those of other
mutual funds. This example illustrates the amount of fees and expenses you would
pay and assumes the following:
- - a $10,000 investment
- - 5% annual return
- - redemption at the end of each period
- - no change in the Fund's operating expenses
- - reinvestment of dividends and capital gains
Because this example is hypothetical and for comparison purposes only,
your actual costs will be different
Shareholder FAM
Fees (fees paid FAM Equity-
directly from Value Income
your investment) Fund Fund
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Maximum Sales
Charge (load) on Purchase none none
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Maximum Deferred
Sales Charge (load) none none
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Annual Fund Operating
Expenses (expenses that are
deducted from Fund assets)
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Management Fees 1.00% 1.00%
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Distribution and
Service (12b-1) Fees none none
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Other Expenses 0.23% 1.12%*
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Total Annual Fund
Operating Expenses 1.23% 2.12%*
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Fee Waiver and/or
Expense Reimbursement none* 0.62%*
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Net Expenses 1.23% 1.50%*
1 3 5 10
Year Years Years Years
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FAM Value Fund $125 $390 $676 $1,489
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FAM Equity-Income
Fund $153 $474 $818 $1,791
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5
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INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RISKS
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INVESTMENT OBJECTIVES
FAM VALUE FUND seeks to maximize long-term total return on capital.
FAM EQUITY-INCOME seeks to provide you with current income as well as
long-term capital appreciation by investing primarily in income-producing
equity securities. This Fund distributes its income on a quarterly basis.
The investment objective of each Fund is a fundamental policy which may not
be changed without a majority vote of a Fund's shareholders.
PRINCIPAL INVESTMENT STRATEGIES
FAM's investment philosophy is to seek out well-managed, financially sound
companies that it considers to be undervalued in the marketplace. Utilizing
investment principles based on the teachings of Benjamin Graham, whose book
Security Analysis provides the foundation for value investing, FAM is
categorized as a bottom-up manager. As such, FAM focuses on identifying,
analyzing, and selecting individual companies that meet FAM's long-term
growth expectation.
Under normal market conditions the FAM Funds will attempt to remain fully
invested in common stocks and securities that are convertible into common
stocks, such as convertible bonds and convertible preferred stock.
In addition, the Funds may invest in those money market funds which
restrict themselves to investments in investment grade short-term fixed
securities, primarily U.S. Treasury and government agency securities. The
Funds may also invest in the common stocks of real estate investment
trusts.
For temporary defensive purposes, the Funds may invest all of their assets
in fixed-income securities. Generally, the Funds only intend to invest in
fixed-income securities when, in FAM's opinion, common stocks are too risky
in relationship to their anticipated rewards and fixed-income securities
are considered a good alternative. During such temporary periods the Funds
might not achieve their stated investment objectives.
6
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INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RISKS
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RISKS
The principal risks of investing in the Funds are as follows:
STOCK MARKET RISK. The value of stocks fluctuate in response to the
activities of individual companies and general stock market and economic
conditions. Stock prices may decline over short or extended periods of
time. Stocks are more volatile and riskier than some other forms of
investments, such as short-term, high grade fixed-income securities.
STOCK SELECTION RISK. The value stocks chosen for the Funds are subject to
the risk that the market may never realize their intrinsic value or their
prices may go down. While the Fund's investments in value stocks may limit
their downside risk over time, the Funds may produce more modest gains than
riskier stock funds as a trade off for this potentially lower risk.
SMALL-CAP RISK. Small capitalization companies may not have the size,
resources or other assets of large capitalization companies. These small
capitalization companies may be subject to greater market risks and
fluctuations in value than large capitalization companies and may not
correspond to changes in the stock market in general.
The value of your investment will go up and down, which means that you
could lose money. You should consider an investment in the FAM Funds as a
long-term investment.
AN INVESTMENT IN FAM FUNDS IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
7
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FUND MANAGEMENT
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THE INVESTMENT ADVISOR
The Investment Adviser to FAM Funds is Fenimore Asset Management, Inc.,
(`Fenimore'), which is a New York corporation majority-owned by Mr. Thomas
O. Putnam and located at 111 N. Grand Street, Cobleskill, NY 12043.
Fenimore has been continuously offering investment advisory and consulting
services under contract since 1975 to individuals, pension, profit sharing,
IRA and Keogh plans, corporations, and non-profit organizations generally
located in a service area that includes the continental United States. Mr.
Putnam, Fenimore's principal investment professional, was born in 1944. He
has been actively employed as an investment advisor since 1974, and holds
responsibilities for Fenimore's investment management and research
activities. Mr. Putnam is the sole shareholder of FAM Shareholder Services,
Inc., each Fund's shareholder servicing agent.
PORTFOLIO MANAGERS
Mr. Putnam co-manages both FAM Value Fund and FAM Equity-Income Fund. John
C. Fox, CFA, serves as co-manager of FAM Value Fund with Mr. Putnam. Mr.
Fox is employed by Fenimore as Investment Research Analyst and has been
actively involved in research activities since he joined the firm in 1996.
Paul C. Hogan, CFA, is co-manager of FAM Equity-Income. He is also employed
by Fenimore as Investment Research Analyst. He has been actively involved
in investment research activities since 1991.
Fenimore employs a staff of experienced investment professionals to manage
assets for other corporate and individual clients.
As principal officer of Fenimore, Mr. Putnam serves as President and
Chairman of the Board of Trustees of Fenimore Asset Management Trust. Under
the terms of the investment advisory contract, Fenimore receives a monthly
fee from each Fund equal to 1% per annum of the average daily market value
of its net assets. The rate is consistent with that being charged by
Fenimore to manage its other client accounts and has been established in
recognition that Fenimore has agreed to assume certain expenses, including
all distribution expenses of the Funds.
FAM Funds and the Advisor have jointly adopted a Code of Ethics which
places certain express restrictions on the personal trading practices of
personnel of both the Fund and Fenimore. This Code of Ethics complies in
all material respects with the recommendations set forth in the 1994 Report
of the Advisory Group on Personal Investing of the Investment Company
Institute. In addition, FAM Funds and Fenimore have developed procedures
that provide for the administration and enforcement of the Code through the
continuous monitoring of personal trading practices.
8
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SHAREHOLDER INFORMATION
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PRICING FUND SHARES
The share price (also called "Net Asset Value" or NAV per share) is
calculated each day at the close of regular trading on the New York Stock
Exchange and on such days as there is sufficient trading in a Fund's
portfolio of securities. Securities in each Fund's portfolio will
ordinarily be valued based upon market quotes. If market quotations are not
available, securities or other assets will be valued by a method which the
Board of Trustees believes most accurately reflects fair value. To
calculate the NAV, a Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding.
HOUSEHOLDING OF SHAREHOLDER MAILINGS
To reduce the volume of mail you receive, each Fund will send a single copy
of most financial reports, prospectuses, and regular communications to a
shareholder with multiple accounts (single, retirement, joint, ect.) if
such accounts have the same tax identification number and the same address.
You may request that additional copies be sent by notifying the Funds.
PURCHASING AND ADDING TO YOUR SHARES
To establish an account, complete and sign the appropriate application and
mail it, along with your check to FAM Funds, P.O. Box 399, Cobleskill, NY
12043. Checks should be made payable to the appropriate fund. Please be
sure to provide your Social Security or taxpayer identification number.
Cash will not be accepted. Any applications received not following the
above guidelines will be returned.
The date on which your purchase is credited is your trade date. For
purchases made by check or Federal Funds wire and received by the close of
regular trading on the New York Stock Exchange (generally 4:00 p.m. Eastern
time) the trade date is the date of receipt. For purchases received after
the close of regular trading on the Exchange the trade date is the next
business day. Shares are purchased at the Net Asset Value ("NAV")
determined on your trade date.
FAM reserves the right to reject purchase applications or to terminate the
offering of shares made by this Prospectus if, in the opinion of the Board
of Trustees, such termination and/or rejection would be in the best
interest of existing shareholders. In the event that your check does not
clear, your order(s) will be canceled and you may be liable for losses or
fees incurred, or both. FAM has a policy of waiving the minimum initial
investment for Fund trustees, and employees and affiliated persons
(including family members) of FAM.
All applications to purchase Fund shares are subject to acceptance by FAM
and are not binding until so accepted. FAM does not accept telephone orders
for the purchase of shares, and it reserves the right to reject
applications in whole or in part.
9
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SHAREHOLDER INFORMATION
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ACCOUNT MINIMUMS
To begin an investment in FAM Funds the following minimum initial
investments must be met. All subsequent investments to an existing account
require a minimum of $50.
FAM
FAM Equity-Income
Value Fund Fund*
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To open a new account $ 2,000 $10,000
To open a new retirement account
{IRA, Roth IRA, SEP, SIMPLE Plan,
Education IRA, or 403(b)(7)} $ 100 $ 2,000
To open a Uniform Transfer to Minors (UTMA) or
Uniform Gift to Minors (UGMA) account $ 500 $10,000
To open a new account with FAMVest** $ 500 $10,000
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* Due to the investment objective of FAM Equity-Income Fund, investments in
this Fund are higher than those of FAM Value Fund.
** FAMVest is FAM's Automatic Investment Plan which requires the systematic
addition of at least $50 per month, as described below.
FAMVEST AUTOMATIC INVESTMENT PLAN
FAM Funds offers FAMVest, an automatic investment plan whereby
authorization is granted and instructions are provided to charge the
regular bank checking account of a shareholder on a regular basis to
provide systematic additions to the shareholder's account. The bank at
which the shareholder checking account is maintained must be a member of
the Automated Clearing House (ACH). While there is no charge to
shareholders for this service, a charge of $10.00 may be deducted from a
shareholder's Fund account in case of returned items. NOTE: Individual
Retirement Account ("IRA") contributions made through FAMVest are assumed
to be current year contributions. A shareholder's FAMVest may be terminated
at any time without charge or penalty by the shareholder or the fund.
WIRE INSTRUCTIONS
If you wish to wire funds to establish a new account, please use the
following instructions. Investors establishing new accounts by wire should
first forward their completed Account Application to FAM Funds stating that
the account will be established by wire transfer and the expected date and
amount of the transfer. Further information regarding wire transfers is
available by calling (800) 932-3271. FAM must have receipt of a wire
transfer no later than 4:00 P.M. in order for the purchase to be made that
same business day.
10
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SHAREHOLDER INFORMATION
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WIRE INSTRUCTIONS (CONTINUED)
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VALUE FUND: FAM EQUITY-INCOME FUND:
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Key Bank of New York Key Bank of New York ABA #021300077 ABA #021300077 For
further credit to acct. For further credit to acct.
#32531 000 6565 #32531 001 8610
FAM Value Fund FAM Equity-Income Fund
Fund Investment for: Fund Investment for:
(Name and/or Account Number) (Name and/or Account Number)
If you wish to wire funds to an existing account, please use the same
instructions listed above.
IRA AND RETIREMENT ACCOUNTS
An individual having earned income and her or his spouse may each have one
or more Individual Retirement Accounts, or "IRAs", the number and amounts
limited only by the maximum allowed contribution per year. Existing IRA
accounts may be rolled over or transferred at any time into a new IRA
account, which may be invested in Fund shares. Firstar Bank, N.A., is
empowered and agrees to act as custodian of shares purchased. Monies
deposited into an IRA account may be invested in shares of one of the Funds
upon the filing of the appropriate forms. Forms establishing IRAs, Roth
IRAs, Education IRAs, SEP- IRAs, SIMPLE Plans, and 403(b)(7) plans are
available by calling FAM Funds at (800) 932-3271. There is no annual
maintenance fee. Investors are urged to consult with a tax advisor in
connection with the establishment of retirement plans.
Monies or deposits into other types of retirement plans and/or Keogh
accounts may also be invested in FAM Fund shares. However, the
qualification and certification of such plans must first be prearranged by
the investor's own tax specialists who would assist and oversee all plan
compliance requirements. Although FAM endeavors to provide assistance to
those investors interested in such plans, it neither offers nor possesses
the necessary professional skills or knowledge regarding the establishment
or compliance maintenance of retirement plans. Therefore, it is recommended
that professional counsel be retained by the investor before investing such
monies in shares of FAM Funds.
No signature guarantee is required if a shareholder elects to transfer an
IRA, Roth IRA, Education IRA, SEP-IRA, SIMPLE Plan, or 403(b)(7) plan to
another custodian or in the event of a mandatory distribution.
11
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SHAREHOLDER INFORMATION
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PURCHASES THROUGH SELECTED DEALERS
Certain Selected Dealers may effect transactions of the FAM Funds. FAM may
accept orders from broker-dealers who have been previously approved by the
Funds. It is the responsibility of such broker-dealers to promptly forward
purchase or redemption orders to the Funds. Although there is no sales
charge levied directly by the Funds, broker-dealers may charge the investor
a transaction-based fee for their services at either the time of purchase
or the time of redemption. Such charges may vary amongst broker-dealers but
in all cases will be retained by the broker-dealer and not remitted to FAM
or the Advisor. The Advisor may make payments to such companies out of its
own resources to compensate these companies for certain administrative
services provided in connection with the Funds. Shareholders who wish to
transact through a broker-dealer should contact FAM at (800) 932-3271 for
further information.
INSTRUCTIONS FOR REDEMPTION OF SHARES
Shareholders wishing to redeem shares may tender them to FAM any business
day by executing a written request for redemption, in good order as
described below, and delivering the request by mail or by hand to the
Funds, 111 North Grand Street, P.O. Box 399, Cobleskill, NY 12043. FAM
OFFERS NO TELEPHONE REDEMPTIONS.
DEFINITION OF GOOD ORDER: Good order means that the written redemption
request must include the following:
1. The Fund account number, name, and Social Security or Tax I.D.
number.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on the
account.
4. Signature guarantees are required if the value of shares being
redeemed exceeds $25,000; or if payment is to be sent to an
address other than the address of record; or if payment is to be
made payable to a payee other than the shareholder; or if there
has been an address change in the last 30 days.
5. Certificates, if any are held, signed and containing a proper
signature guarantee.
6. Other supporting legal documentation that might be required, in
the case of retirement plans, corporations, trusts, estates and
certain other accounts.
Shareholders requesting redemption proceeds to be wired from FAM will incur
a $8 wire fee charged by the Funds' custodian.
Shareholders may sell all or any portion of their shares on any such
business day that NAV is calculated. Such shares will be redeemed by FAM at
the next such calculation after such redemption request is received and
accepted by FAM. When a redemption occurs shortly after a recent purchase
made by check, FAM Funds may hold the redemption proceeds beyond 7 days but
only until the purchase check clears, which may take up to 15 days or more.
IF YOU ANTICIPATE REDEMPTIONS SOON AFTER YOU PURCHASE YOUR SHARES, YOU ARE
ADVISED TO WIRE FUNDS TO AVOID DELAY.
12
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SHAREHOLDER INFORMATION
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INSTRUCTIONS FOR REDEMPTION OF SHARES (CONTINUED)
FAM reserves the right, however, to withhold payment up to seven (7) days
if necessary to protect the interests and assets of the Funds and their
shareholders. In the event the New York Stock Exchange is closed for any
reason other than normal weekend or holiday closing or if trading on that
exchange is restricted for any reason, or in the event of any emergency
circumstances as determined by the Securities and Exchange Commission, the
Board of Trustees shall have the authority and may suspend redemptions or
postpone payment dates accordingly.
Redemption of shares, whether it be a normal voluntary redemption or an
involuntary redemption, may result in the shareholder realizing a taxable
capital gain or loss.
SIGNATURE GUARANTEES
For our mutual protection, signature guarantees may be required on certain
written transaction requests. A signature guarantee verifies the
authenticity of your signature and may be obtained from "eligible guarantor
institutions".
Eligible guarantor institutions include (1) national or state banks,
savings associations, savings and loan associations, trust companies,
savings banks, industrial loan companies and credit unions; (2) national
securities exchanges, registered securities associations and clearing
agencies; (3) securities broker-dealers which are members of a national
securities exchange or a clearing agency or which have minimum net capital
of $100,000; or (4) institutions that participate in the Securities
Transfer Agent Medallion Program ("STAMP") or other recognized signature
medallion program.
A SIGNATURE GUARANTEE CANNOT BE PROVIDED BY A NOTARY PUBLIC.
Signature guarantees will be required under the following circumstances:
1. Redemption of Shares IF:
- the value of shares being redeemed exceeds $25,000 - payment is requested
payable to a payee other than the shareholder of
record
- payment is to be sent to an address other than the address of record - an
address change accompanies the redemption request or there has been
a change of address on the account during the last 30 days
- the shares are represented by a negotiable stock certificate
2. Transferring of Ownership and/or Account Name Changes
SYSTEMATIC WITHDRAWAL PLAN
For your convenience you may elect to have automatic periodic redemptions
from your account. Shareholders who wish to participate in the systematic
withdrawal plan must complete the appropriate form and return to FAM 30
days prior to the first scheduled redemption.
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SHAREHOLDER INFORMATION
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INFORMATION ON DISTRIBUTIONS AND TAXES
ALL NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS GENERATED AS A
RESULT OF PORTFOLIO MANAGEMENT ACTIVITIES ARE DISTRIBUTED TO SHAREHOLDERS.
A capital gain or loss is the difference between the purchase and sale
price of a security. If a Fund has net capital gains for the year they are
usually declared and paid in December to shareholders of record in the
month of December.
Dividend and capital gain distributions are reinvested in additional Fund
shares in your account, unless you select another option on your account
application form. Investors who want dividend and/or capital gains
distributions sent to them in cash rather than invested in additional
shares must arrange this by making a request to FAM. The request must be in
written form acceptable to FAM. Unless investors request cash distributions
in writing at least 7 business days prior to the distribution, or on the
Account Application, all dividends and other distributions will be
reinvested automatically in additional shares of the funds. Capital gains,
if any, will be distributed in December.
The value of your shares will be reduced by the amount of dividends and/or
capital gains. If you purchase shares shortly before the record date for a
dividend or the distribution of capital gains, you will pay the full price
for the shares and receive some portion of the price back as a taxable
dividend or distribution.
TAX INFORMATION
Within taxable accounts dividends are taxed as ordinary income.
Distributions designated by a Fund as long-term capital distributions will
be taxable to you at your long-term capital gains rate, regardless of how
long you have held your Fund shares. An exchange of Fund shares for shares
of another fund is considered a sale, and gains from any sale or exchange
may be subject to federal and state taxes. Dividends generally are taxable
in the year in which they are accrued, even if they appear on your account
statement the following year. Dividends and distributions are treated the
same for federal tax purposes, whether you receive them in cash or in
additional shares of the Fund. Depending on your resident for tax purposes,
distributions may also be subject to state and local taxes.
If you hold shares through a tax-deferred account, such as a retirement
plan, income and gains will not be taxable each year. Instead, the taxable
portion of amounts you hold in a tax-deferred account will generally be
subject to tax only when they are distributed from the account.
You will be notified in January each year, through our "Supplementary Tax
Information" flyer, about the federal tax status of distributions made the
previous year.
The Funds are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided
the Funds with their certified taxpayer identification number in compliance
with IRS rules. To avoid this, make sure you provide your correct tax
identification number (Social Security Number for most investors) on your
account application.
This tax discussion is meant only as a general summary. Because everyone's
tax situation is unique, you should consult your tax professional about
particular consequences to you of investing in the Funds.
14
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table on page 15 and 16 provide information about
each Fund's financial history and are expressed in one share outstanding
throughout each fiscal year. Each table is part of the Fund's financial
statements which are included in its annual report and are incorporated
herein by reference in the Statement of Additional Information, which is
available upon request. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in the Fund,
assuming reinvestment of all dividends and capital gains. The financial
statements in the annual report were audited by the Fund's independent
accountants, PricewaterhouseCoopers, LLP, for the year ended December 31,
1999, and by other auditors for the years before 1999.
FAM VALUE FUND SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
PER SHARE INFORMATION
(For a share outstanding throughout
<S> <C> <C> <C> <C> <C>
the year) 1999 1998 1997 1996 1995
-----------------------------------------------
Net asset value, beginning of year $34.44 $35.76 $26.53 $24.58 $21.04
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.29 .20 0.08 0.18 0.21
Net realized and unrealized gain
on investments (2.00) 1.94 10.29 2.58 3.94
------ ------ ------ ------ ------
Total from investment operations (1.71) 2.14 10.37 2.76 4.15
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.29) (.20) (0.08) (0.18) (0.21)
Distributions from net realized gains (1.09) (3.26) (1.06) (0.63) (0.40)
------ ------ ------ ------ ------
Total distributions (1.38) (3.46) (1.14) (0.81) (0.61)
------ ------ ------ ------ ------
Change in net asset value for the year (3.09) (1.32) 9.23 1.95 3.54
------ ------ ------ ------ ------
Net asset value, end of year $31.35 $34.44 $35.76 $26.53 $24.58
====== ====== ====== ====== ======
TOTAL RETURN (4.84%) 6.19% 39.06% 11.23% 19.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $373,277 $379,269 $333,159 $253,378 $267,158
Ratios to average net assets of:
Expenses 1.23% 1.19% 1.24% 1.27% 1.25%
Net investment income 0.86% 0.57% 0.25% 0.64% 0.92%
Portfolio turnover rate 16.16% 16.67% 9.47% 12.48% 9.67%
</TABLE>
15
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FAM EQUITY-INCOME FUND SELECTED FINANCIAL INFORMATION
Per share information April 1, 1996
(For a share outstanding Years Ended December 31, (inception) to
throughout the year) 1999 1998 1997 December 31, 1996
---------------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $13.53 $13.20 $10.99 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income 0.27 0.28 0.27 0.19
------ ------ ------ ------
Net realized and unrealized gain
on investments (1.22) (0.33) 2.65 0.99
------ ------ ------ ------
Total from investment operations (0.95) .61 2.92 1.18
------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.27) (0.28) (0.27) (0.19)
Distributions from net
realized gains -- -- (.44) --
------ ------ ------ -------
Total distributions (0.27) (0.28) (.71) (0.19)
------ ------ ------ -------
Change in net asset value
for the year (1.22) (0.33) 2.21 0.99
------ ------ ------ -------
Net asset value, end of year $12.31 $13.53 $13.20 $10.99
====== ====== ====== ======
Total Return (6.98%) 4.67% 26.90% 15.90%*
Ratios/supplemental data
Net assets, end of year (000) $6,653 $6,725 $4,386 $2,539
Ratios to average net assets of:
Expenses, total 2.12% 2.09% 2.50% 5.04%*
Expenses, net of fees waived and
expenses assumed by advisor 1.50% 1.50% 1.50% 1.50%*
Net investment income 2.15% 2.17% 2.27% 3.05%*
Portfolio turnover rate 13.49% 10.55% 15.63% 0.00%
<FN>
* annualized
</FN>
</TABLE>
16
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
TO OBTAIN ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
If you would like additional information or would like to make inquiries
about FAM Value Fund or FAM Equity-Income Fund, free reports on the Funds
are available upon request and inquiries may be directed to:
FAM Funds
111 North Grand Street
P.O. Box 399
Cobleskill, NY 12043
1 (800) 932-3271
www.famfunds.com
SHAREHOLDER REPORTS
Each Fund's Annual Report and Semi-Annual Report contains additional
information about the Fund's investments. The Fund's Annual Report contains
a discussion of the market conditions and investment strategies that
significantly affected the performance of the Fund during the last fiscal
year. Both the Annual Report and the Semi-Annual Report also contain fund
performance information, financial statements and complete portfolio
holdings.
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains more comprehensive information on the Funds. The SAI is
incorporated by reference into this prospectus which makes it legally part
of this prospectus.
Information may also be obtained from the Securities and Exchange
Commission for the cost of a duplicating fee. These documents are also
available to view at the SEC's public reference room in Washington, DC or
by electronic request by e-mailing the SEC at the following address:
[email protected].
Securities and Exchange Commission Washington, DC 20549-0330
(202) 942-8090 www.sec.gov Investment Company Act File No.
811-4750
FAM Funds
P.O. Box 399
Cobleskill, New York 12043
(800) 932-3271
www.famfunds.com
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
FAM FUNDS
____________________________________________________________________________
111 North Grand Street, P.O. Box 399, Cobleskill, NY 12043
Telephone Number (800) 932-3271
www.famfunds.com
A "FAM"ILY of NO-LOAD FUNDS
May 1, 2000
____________________________________________________________________________
FAM FUNDS ["FAM"], a family of no-load mutual funds, currently offers two
diversified open-end, no-load mutual funds, FAM Value Fund and FAM Equity-Income
Fund. Each Fund is a separate investment series of Fenimore Asset Management
Trust which is registered with the Securities and Exchange Commission ( SEC ) as
an open-end management investment company.
This Statement of Additional Information is not a Prospectus but rather should
be read in conjunction with the Prospectus dated the same date. A copy may be
obtained without charge from FAM by calling or writing its corporate office at
the address and telephone number herein noted.
<PAGE>
Table of Contents
Investment Objective and Policies.................................... 3
Investment Restrictions.............................................. 4
History and Background of Investment Advisor........................ 6
Board of Trustees and Officers....................................... 8
Brokerage Allocations................................................ 11
Net Asset Value Calculation.......................................... 11
Purchase of Shares................................................... 12
Redemption of Shares................................................. 13
Performance Information.............................................. 13
Financial Statements................................................. 15
Certain Federal Income Tax Considerations............................ 15
Tax Status of the Funds.............................................. 15
Funds Investments.................................................... 16
Distributions........................................................ 17
Dispositions......................................................... 17
Appendix............................................................. 18
Investment Advisor:
Fenimore Asset Management, Inc.
118 North Grand Street
Cobleskill, NY 12043
2
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
FAM offers two mutual funds with distinctly different investment objectives. FAM
Value Fund has an investment objective to maximize long term total return on
capital. FAM Equity-Income has an investment objective of providing current
income as well as long term capital appreciation by investing primarily (at
least 65% of its total assets) in income-producing equity securities. Normally
investments will be concentrated in common stocks unless the stock market
environment has risen to a point where the advisor to the Fund, Fenimore Asset
Management, Inc., ("Fenimore"), can no longer find securities that have been
determined by FAM to be undervalued. During such periods investments will be
made in fixed-income investments until such time as more attractive common
stocks can be found for purchase.
It is the opinion of FAM that the objectives of its funds are achievable when
common stocks can be purchased near to, or at, a discount from their true
business worth. Specifically, FAM will be seeking to invest assets in companies
that may have some or all of the following characteristics: (a) low
price-to-earnings multiples relative to the market as a whole, based upon
current and/or potential future earnings of the company; (b) high total returns
on capital and with low debt structures; and (c) sell at a market price per
share that is near or at a discount to the per share book value -- an accounting
measure of economic worth. Although the objective is to select stocks with these
characteristics, FAM is aware that it is unrealistic to assume that each
selection will have all or even several of the above characteristics.
FAM believes that the success of a stock that has some of the above
characteristics is dependent upon and invariably a reflection of the quality of
management. Therefore, FAM spends time in an attempt to assess management's
ability prior to making a commitment to its shares with Fund assets. The
assessment may include an analysis of historical financial achievements of the
company, direct discussions with management by telephone or in person,
visitations to the company, conversations with security analysts who actively
follow the company for investment brokerage firms, and discussions with
competitors, suppliers, and customers of the company. While FAM feels this
assessment technique to be clearly instrumental to the success of the
investment, it should be recognized that judgments made by FAM are purely
subjective in nature. Therefore, there can be no assurance that FAM will be
successful in achieving its investment objectives for the Funds.
It is FAM's belief that the objectives of its funds can only be achieved
consistently over a long investment horizon. Typically, this will mean that a
stock may be held for a three-to-five year period or longer if FAM, by its own
determination, feels that the recognition of true business worth has not yet
been attained in the stock's current market quotation. Thus, the Funds serve
little purpose for investors who wish to take advantage of short-term
fluctuations in net asset values per share.
3
<PAGE>
From time to time, FAM may also choose to invest some or all of its assets in
fixed-income investments of the types more fully described in the Funds'
Prospectus dated this same date. Such investments will be purchased and held
during periods when FAM is unable to find stocks that it believes have return
expectations commensurate with the risks that must be assumed by their continued
retention.
FAM recognizes that while the Funds remain small in size FAM may have
greater flexibility in achieving its objectives. However, as the Funds grow in
size, it may become more difficult for FAM to find securities to invest in that
meet the objectives of the Funds. This may also occur during periods when the
stock market in general has been rising for a long period of time. Therefore,
FAM reserves unto itself the right to limit the asset size of its Funds
by discontinuing sales of its shares at any time. The Board of Trustees of
FAM Funds may suspend sales whenever, in its collective wisdom, it believes
it necessary in order for FAM to continue to adhere to its stated objectives,
or that for other reasons it would be in the best interests of Fund shareholders
to do so. While sales are suspended, existing shareholder accounts will be able
to continue to reinvest their dividends and will be able to continue to
redeem their shares.
It should be clear to investors in FAM Funds that FAM believes income is
an important factor in achieving its objecives. Fenimore is aware that
annual distributions of capital gains and dividend/interest income earned on
shares may result in a shareholder paying additional federal, state and/or local
income taxes. (See Certain Federal Income Tax Considerations on Page 15). Tax
deferred portfolios, like IRA and pension monies, are ideally suited for
investment in shares of FAM Funds for these reasons.
At the present time FAM has no authority to write, buy or sell options
or futures against its share positions and any change in this investment
approach would be considered a material change and must first be obtained
from shareholders by consent of a majority of the votes cast. It has no plans at
this time to deal in the options markets or to seek authorization from
shareholders to do so.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions which cannot be changed
or amended unless approved by the vote of a majority of its outstanding shares
in accordance with requirements under the Investment Company Act of
1940. Accordingly, no FAM Fund will:
(A) Invest in the purchase and sale of real estate.
(B) Invest in commodities or commodity contracts, restricted securities,
mortgages, or in oil, gas, mineral or other exploration or development
programs.
4
<PAGE>
(C) Borrow money, except for temporary purposes, and then only in amounts
not to exceed in the aggregate 5% of the market value of its total
assets taken at the time of such borrowing.
(D) Invest more of its assets than is permitted under regulations
in securities of other registered investment companies, which
restricts such investments to a limit of 5% of Fund assets in any one
registered investment company, and 10% overall in all registered
investment companies, in no event to exceed 3% of the outstanding shares
of any single registered investment company.
(E) Invest more than 5% of its total assets at the time of purchase in
securities of companies that have been in business or been in continuous
operation less than 3 years, including the operations of any
predecessor.
(F) Invest or deal in securities which do not have quoted markets.
(G) Own more than 10% of the outstanding voting securities of any one issuer
or company, nor will it, with at least 75% of its total assets, invest
more than 5% of its assets in any single issue, valued at the time of
purchase. This restriction shall not be applicable for investments in
U.S. government or agency securities.
(H) Invest more than 25% of its assets valued at the time of purchase in any
one industry or similar group of companies, except U.S. government
securities.
(I) Maintain margin accounts, will not purchase its investments on credit or
margin, and will not leverage its investments, except for normal
transaction obligations during settlement periods.
(J) Make any investment for the purpose of obtaining, exercising or for
planning to exercise voting control of subject company.
(K) Sell securities short.
(L) Underwrite or deal in offerings of securities of other issuers as a
sponsor or underwriter in any way. (Note: FAM may be deemed an
underwriter of securities when it serves as distributor of its own
shares for sale to or purchase from its shareholders.)
(M) Make loans to others or issue senior securities. For these purposes the
purchase of publicly distributed indebtedness of any kind is excluded
and not considered to be making a loan.
In regard to the restriction marked as item (D) above, FAM plans to
utilize computerized cash management services offered by its custodian, which
services presently include reinvesting
5
<PAGE>
overnight and short term cash balances in shares of other registered investment
companies, better known as "money market funds", whose primary objective is
safety of principal and maximum current income from holding highly liquid,
short-term, fixed investments, principally U.S. government and agency issues.
FAM will not be acquiring such shares as permanent investments but rather will
be utilizing such services solely for convenience and efficiency as it tries to
keep short-term monies invested at interest only until such time as more
permanent reinvestment can practically be made in the ordinary course of
business. In any case, FAM shall not invest a greater percentage of its assets
than is permitted by regulation, which is presently 5% of its total assets in
any single fund nor more than 10% of its total assets in funds overall.
HISTORY AND BACKGROUND OF INVESTMENT ADVISOR
The investment advisor to the FAM Funds is Fenimore Asset Management, Inc.,
("Fenimore"). The company is a New York corporation presently in business
and practicing as an "Investment Advisor" and registered under the
Investment Advisors Act of 1940 with the Securities and Exchange Commission and
with the New York State Attorney General. Fenimore is majority owned by Mr.
Thomas O. Putnam, its principal officer, who is also the principal officer and a
trustee of FAM Funds. FAM was incorporated November 20, 1974, and has been
continuously offering investment advisory services since the date of its
formation under the direction and control of Mr. Putnam. The principal activity
of Fenimore since 1974 has been to provide investment advisory and consulting
services under contract to individuals, pension, profit-sharing, IRA and Keogh
retirement plans, corporations, and non-profit organizations generally located
in the service area that includes the continental U.S. Mr. Thomas O. Putnam,
Fenimore's principal investment professional, has been employed or active as an
investment advisor since 1974, managing investment accounts for clients. He has
held responsibilities as President and Director of Fenimore's investment
management and research activities. Mr. Putnam completed his undergraduate
studies at the University of Rochester, Rochester, NY, from which he earned a
Bachelor of Arts Degree in Economics in 1966. He completed graduate work at
Tulane University, New Orleans, Louisiana, from which he received an MBA in
1968. John Fox, CFA, co-manager of FAM Value Fund, is employed by Fenimore as
Investment Research Analyst. He has been actively involved in investment and
portfolio management and research activities since 1996. Paul C. Hogan, CFA,
co-manager of FAM Equity-Income, is also employed by Fenimore as Investment
Research Analyst. He has been actively involved in investment research
activities since 1991. Fenimore employs a staff of experienced investment
professionals to manage assets for other corporate and individual clients.
Since 1974, Fenimore, under the control and supervision of Mr. Putnam, has
utilized a value investment approach for each client and/or each account. In the
opinion of Fenimore, the objectives of FAM Funds can only be met if companies
can be purchased at a significant discount from what Fenimore views as their
true business worth. In this regard a company is researched almost as if the
entire company could be purchased at current stock market prices. Although it
will never be the intention of FAM to purchase controlling interests in any such
company, it is
6
<PAGE>
Fenimore's belief that this fundamental valuation approach removes emotionality
from the investment decision-making process and minimizes the long term risk of
the investment. Fundamental to this approach is the seeking of securities of
companies that have: (1) demonstrated records of above-average growth of sales
and earnings over the past 5 to 10 year span and are selling at a price which
Fenimore believes is at a discount from the true business worth of the company;
(2) become severely depressed in the market because of adverse publicity and
are, thus, selling at a deep discount to the perceived future potential value of
the company; (3) the capability of achieving accelerated growth of earnings and
the current price understates this potential. Future values may be 100% or more
of the current price of the stock and recognition of these values may take two
to five years or longer to be realized in the stock market.
It is the intention of Fenimore to advise FAM to attempt to follow a
similar, though not exactly identical, approach. The primary difference is
expected to be that FAM will be freer to sell shares of issues that have
achieved price targets and intends to do so, regardless of tax implications.
Investment portfolios for individuals tend to be more constrained by such tax
considerations under existing tax laws, thus turnover is most often at a rate
that is well below published investment industry averages.
Fenimore will not invest assets of any other managed account in shares of
FAM Funds except as directed in writing by a person unaffiliated to the Funds or
to Fenimore, having authority to make such direction. Fenimore, as
investment advisor to the FAM Funds, renders such services under contract that
provides for payment to Fenimore of a fee, calculated daily and paid monthly, at
the rate of 1% per annum of each Funds net assets, which rate is consistent with
that being charged by Fenimore to manage its other client accounts but which is
higher than the fee charged by most other investment companies. This contract is
subject to the approval annually by FAM Fund's Board of Trustees and is
terminable upon 30 days written notice, one party to the other.
With respect to FAM Value Fund, the total investment advisory fees paid by
FAM Value Fund to Fenimore during each of the last three fiscal years is as
follows:
Fiscal Year Fiscal Year Fiscal Year
Ended...... Ended Ended
December 31, 1999 December 31, 1998 December 31, 1997
- ----------------- ----------------- -----------------
$3,961,336. $3,488,163 $2,687,1383
With respect to FAM Equity-Income Fund, the total investment advisory
fees earned by Fenimore and the amount of investment advisory fees waived by
Fenimore during each of the last three fiscal years is as follows:
7
<PAGE>
Period From
Fiscal Year Fiscal Year April 1, 1996
Ended Ended (inception) to
December 31, 1999 December 31, 1998 December 31, 1997
- ----------------- ----------------- -----------------
Fees Fees Fees Fees Fees Fees
Earned Waived Earned Waived Earned Waived
- ------ ------ ------ ------ ------ ------
$67,556 $41,765 $57,897 $34,478 $33,560 $33,560
Each FAM Fund is responsible for the fees of independent accountants,
brokerage fees and the cost of a surety bond, as required by the Investment
Company Act of 1940. Expenses of "interested" trustees shall always remain the
responsibility of the investment advisor. FAM is responsible for the cost of its
operation, including routine administrative expenses of mailing proxies and
shareholder notices/reports, computer services and for record-keeping the
shareholder ledgers and books. All employees of the investment advisor who
perform duties for FAM shall remain employees of the investment advisor, who
shall bear all employment costs of such staff. If Fenimore ceases to operate for
any reason or assigns the contract, such contract is automatically terminated.
BOARD OF TRUSTEES
Overall responsibility for management of the FAM Funds rests with their Board
of Trustees, which is elected by the shareholders of the Funds. The Trustees
elect the officers of the Funds to actively supervise the day-to-day operations
of the Funds.
The names of Board of Trustees of the FAM Funds, and their respective duties
and affiliations are as follows:
Primary Occupation;
Name, Address, and Age Business Affiliations Position with the Fund
- ---------------------- --------------------- ----------------------
Thomas O. Putnam* Chairman, Treasurer Chairman of Board
P.O. Box 310 Fenimore Asset Mgmt. President
Cobleskill, NY 12043
Age: 55
8
<PAGE>
Bernard H. Zais, CLU Simson, Brown & ZaisTrustee
PO Box 630
Colchester, VT 05446
Age: 84
Roger A. Hannay President, Trustee
PO Box 159. Hannay Reels, Inc.
Westerlo, NY 12193-0159
Age: 58
Joseph J. Bulmer Retired President, Trustee
7 Sultana Street Hudson Valley Community
Saratoga Springs, College
NY 12866
Age: 70
Fred "Chico" Lager Business Consultant; Trustee
831 Williston Road Director, Whole Foods
Williston, VT 05495 Market, Inc., Austin, TX;
Age: 45.... Retired President
and Chief Executive
Officer of Ben & Jerry's
Homemade, Inc.
*Interested persons as defined under the 1940 Act.
Officers and Trustees of the FAM Funds own less than 1% of each Fund's shares
outstanding except for Mr. Putnam who owns beneficially 7.26% of the outstanding
shares of FAM Equity-Income Fund.
Trustees of the FAM Funds not employed by Fenimore receive from FAM Funds a
fee of $800 for each Board of Trustees meeting, $4,000 annual retainer, $500
for each committee meeting, and are reimbursed for all out-of-pocket
expenses relating to attendance at such meetings. The $4,000 annual retainer is
paid exclusively with shares of each Fund such that the Trustees receive on an
annual basis $2,000 in FAM Value Fund shares and $2,000 in FAM Equity-Income
shares. Trustees who are employees of Fenimore do not receive compensation from
FAM Funds.
9
<PAGE>
For the fiscal year ended December 31, 1999, the Trustees received the
following compensation from the Funds and from certain other investment
companies (if applicable) that have the same investment advisor as the Fund or
an investment advisor that is an affiliated person of the Fund's investment
advisor:
<TABLE>
<CAPTION>
Name of Aggregate Pension or Est. Annual Total
Trustee Compensation Retirement Benefits upon Compensation
from the Funds Benefits Retirement from Registrant
Accrued as Part and Fund
of Fund Complex
Expenses (2 Funds) Paid
to Trustees
- ------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C>
Thomas O. $0 $0 $0 $0
Putnam
John W. $8,150 $0 $0 $8,150
Krueger*
Bernard H. $9,500 $0 $0 $9,500
Zais
Roger A. $10,000 $0 $0 $10,000
Hannay
Joseph J. $10,000 $0 $0 $10,000
Bulmer.
Diane $0 $0 $0 $0
Van Buren
Markely**
Fred $10,000 $0 $0 $10,000
Lager
<FN>
* John W. Krueger resigned as Trustee of Fenimore Asset Management Trust
effective September, 1999/
** Diane Van Buren Markley resigned as Trustee, Secretary and Treasurer of
Fenimore Asset Management Trust effective April 17, 2000.
</FN>
</TABLE>
10
<PAGE>
BROKERAGE ALLOCATIONS
It is Fenimore's policy to allocate brokerage business to the best advantage
and benefit of its shareholders. All securities transactions are made so as
to obtain the most efficient execution at the lowest transaction cost. Nothing
in this policy, however, is to be construed to prohibit Fenimore from
allocating transactions to firms whose brokerage charges may include the cost of
providing investment advisory or research or other legally permitted services
which Fenimore deems to be necessary and/or valuable to the successful
management of its assets. Each buy or sell order will be placed according to the
type, size and kind of order involved and as each condition may demand, so as to
attempt to secure the best result for Fenimore and Fund shareholders, all
factors considered. For the fiscal years ending December 31, 1999, 199, and
1997 respectively, aggregate commissions paid totalled $224,296, $104,286
and $100,098 for FAM Value Fund. With respect to FAM Equity-Income, for the
fiscal year ending December 31, 1997, aggregate commissions paid totalled
$2,124; for the fiscal year ending December 31, 1998, aggregate commissions paid
totalled $5,860, and for the fiscal year ending December 31, 1999, the
aggregate commissions paid totalled $3,900. No commissions were paid by either
Fund to any affiliated parties.
NET ASSET VALUE CALCULATION
The net asset value per share is computed by dividing the aggregate market
value of a Fund's assets daily, less its liabilities, by the number of
portfolio shares outstanding. Portfolio securities are valued and net asset
value per share is determined as of the close of business on the New York Stock
Exchange ("NYSE"), which currently is 4:00 p.m. (New York City time), on each
day the New York Stock Exchange is open and on any other day in which there is a
sufficient degree of trading in Fund portfolio securities that the current net
asset value per share might be materially affected by changes in portfolio
securities values. NYSE trading is closed weekends and holidays, which are
listed as New Years Day, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
Portfolio securities listed on an organized exchange are valued on the basis
of the last sale on the date the valuation is made. Securities that are not
traded on that day, and for which market quotations are otherwise readily
available, and over-the-counter securities for which market quotations are
readily available, are valued on the basis of the bid price at the close of
business on that date. Securities and other assets for which market quotations
are not readily available or have not traded are valued at fair value as
determined by procedures established by the Board of Trustees. Notwithstanding
the above, bonds and other fixed-income securities may
11
<PAGE>
be valued on the basis of prices determined by procedures established by the
Board of Trustees if it is the belief of the Board of Trustees that such price
determination more fairly reflects the fair value of such securities. Money
market instruments are valued at amortized cost which approximates market value
unless the Board of Trustees determines that such is not a fair value.
The sale of shares of FAM Funds will be suspended during periods when
the determination of its net asset value is suspended pursuant to rules or
orders of the Securities and Exchange Commission, or may be suspended by the
Board of Trustees whenever in its sole judgment it believes it is in the best
interest of shareholders to do so.
PURCHASE OF SHARES
To begin an investment in FAM Funds the following minimum initial
investments must be met. All subsequent investments to an existing account
require a minimum of $50.
<TABLE>
<CAPTION>
FAM Value Fund FAM Equity-Income Fund*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
To open a new account $2,000 $10,000
To open a new retirement account
{IRA, SEP, or 403(b)(7)} $ 100 $ 2,000
To open a Uniform Transfer to Minors (UTMA) or
Uniform Transfer to Minors (UGMA) account $ 500 $10,000
To open a new account with FAMVest** $ 500 $10,000
<FN>
* Due to the investment objective of FAM Equity-Income Fund, minimum investments
in this Fund are higher than those of FAM Value Fund.
**FAMVest is FAM Fund's Automatic Investment Plan which requires the systematic
addition of at least $50 per month, as described below. Please refer to
"Redemption of Shares" on page 13.
</FN>
</TABLE>
To establish an account, complete and sign the appropriate application and
mail it, along with your check to FAM Funds, P.O. Box 399, Cobleskill, NY
12043. Checks should be made payable to the appropriate fund. A copy of the
application form is available to prospective investors upon request to FAM
Funds, which is the sole distributor of Fund shares. The offering price of such
purchases will be at the net asset value per share next determined after receipt
by FAM of a valid purchase order. The date on which the application is accepted
by FAM and the net asset value determination at the close of business on that
date shall determine the purchase price and shall normally be the purchase date
for shares. FAM reserves the right to
12
<PAGE>
withhold or reject requests for purchases for any reason, including
uncollectible funds. Cash will not be accepted. In the event of a cancellation
of any purchase due to uncollectible funds, the purchaser shall be liable for
all administrative costs incurred and for all other losses or charges for such
invalid transfer and/or purchase.
Subsequent Purchases: Purchases of shares made subsequent to an initial
purchase may be made by mail to FAM at its current address. All subsequent
purchases must be made in amounts of no less than $50, and such amounts shall be
due and payable in good funds to FAM on the purchase date.
Reinvestment: FAM Funds will automatically reinvest all dividend
distributions to shareholders in additional shares of the Fund at net asset
value as next determined as of the close of business on the payment date of such
dividend distribution, unless otherwise instructed by the shareholder in writing
prior to the record date for such distributions.
Fractional Shares: When share purchases or redemptions are made or when cash
is requested by a shareholder, shares will be issued or redeemed respectively,
in fractions of a share, calculated to the third decimal place. (Example: $2,000
invested in shares at a net asset value of $11.76 per share will purchase
170.068 shares.)
REDEMPTION OF SHARES
Shareholders may sell all or a portion of their shares to FAM on any day
that NAV is calculated and such redemptions will be made in the manner as
described in detail in the Funds' Prospectus. All redemptions are subject to the
terms and conditions as set forth therein. FAM shall have the right to refuse
payment to any registered shareholder until all legal documentation necessary
for a complete and lawful transfer is in the possession of FAM or its agents, to
the complete satisfaction of FAM Funds and its Board of Trustees.
PERFORMANCE INFORMATION
The Funds may, from time to time, include their total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for each Fund will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of one, five and ten years (up to the life of the Fund)
calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return, n =
the number of years, and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). All total return figures
reflect the deduction of a proportional share of Fund expenses on an annual
basis, and assume that all dividends and distributions are reinvested when paid.
FAM Value Fund's average annual total return for the one-, five-, and ten-year
periods ended December 31, 1999 and for the period from commencement of
operations on January 2, 1987 (inception) through December 31, 1999 was -4.8%,
13.4%, 13.3% and 12.7% respectively. FAM Equity-Income Fund's total return for
the one year period ended December 31, 1999 was -7.0% and its lifetime average
annual total return for the period from April 1, 1996 (inception) to December
31, 1999 was 9.0%.
13
<PAGE>
Quotations of yield for a FAM Fund will be computed by dividing the
net investment income per share earned by the Fund during a 30-day period by
the maximum offering price per share on the last day of the period, according to
the following formula:
6
Yield = 2[(a-b+1)-1]
--
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of Shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per Share on the last day of the period.
FAM Equity-Income Fund's yield for the 30-day period ended December 31, 1998
was 2.43%.
Performance information for any FAM Fund may be compared, in reports
and promotional literature, to: (i) the Standard & Poor's 500 Stock Index, the
Dow Jones Industrial Average, or other unmanaged indices so that investors
may compare Fund results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities market in
general; (ii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds by
overall performance, investment objectives and assets, or tracked by other
services, companies, publications, or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Fund.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
14
<PAGE>
Performance information for the Funds reflect only the performance of
a hypothetical investment in the Funds during the particular time period on
which the calculation are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the given time period,
and should not be considered as a representation of what may be achieved in the
future.
FINANCIAL STATEMENTS
The Financial Statements of each Fund are included in the 1998 Annual Report
to Shareholders and are incorporated by reference into this Statement of
Additional Information. Copies of the Financial Statements may be obtained upon
request and without charge from FAM at the address and telephone provided on the
cover of this Statement of Additional Information.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a discussion of certain U.S. federal income tax
issues concerning the Funds and the purchase, ownership, and disposition of
Fund shares. This discussion does not purport to be complete or to deal with
all aspects of federal income taxation that may be relevant to shareholders in
light of their particular circumstances. This discussion is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial and administrative
ruling authorities, all of which are subject to change, which change may
be retroactive. Prospective investors should consult their own tax advisors
with regard to the federal tax consequences of the purchase, ownership,
or disposition of Fund shares, as well as state, local and foreign
tax consequences.
TAX STATUS OF THE FUNDS
Each Fund intends to be taxed as a regulated investment company under
Subchapter M of the Code. Accordingly, each 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 certain securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is
represented by cash and cash items, U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities limited, in respect of any one issuer, 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 and the securities of other regulated investment
companies).
15
<PAGE>
As a regulated investment company, a Fund generally is not subject to
U.S. federal income tax on income and gains that it distributes to shareholders,
if at least 90% of the Fund's investment company taxable income (which
includes, among other items, dividends, interest and the excess of any net
short-term capital gains over net long-term capital losses) for the taxable year
is distributed. Each Fund intends to distribute substantially all of such
income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, each Fund must distribute during each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses) for a one-year period generally ending on
October 31 of the calendar year, and (3) all ordinary income and capital gains
for previous years that were not distributed during such years. To avoid
application of the excise tax, each Fund intends to make distributions in
accordance with the calendar year distribution requirement.
A distribution will be treated as paid on December 31 of a calendar year if
it is declared by a Fund in October, November or December of that year with
a record date in such a month and paid by the Fund during January of the
following year. Such distributions will be taxable to shareholders in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received.
FUND INVESTMENTS
Certain debt securities acquired by a Fund may be treated as debt
securities that were originally issued at a discount. Very generally, original
issue discount is defined as the difference between the price at which a
security was issued and its stated redemption price at maturity. Although no
cash income on account of such discount is actually received by a Fund, original
issue discount that accrues on a debt security in a given year generally is
treated for federal income tax purposes as interest and, therefore, such income
would be subject to the regulated investment company distribution requirement.
Some debt securities may be purchased by a Fund at a discount that exceeds the
original issue discount on such debt securities, if any; this additional
discount represents market discount for federal income tax purposes.
If a Fund purchases a debt security at a price lower than the stated
redemption price of such debt security, the excess of the stated redemption
price over the purchase price is "market discount". The Fund may be required to
include a portion of such market discount as ordinary income in each taxable
year in which the Fund owns an interest in the debt security and receives a
principal payment on it. The Fund may be required to allocate the principal
payment first to the portion of the market discount on the debt security that
has accrued but has not previously been includable in income. In general, the
amount of market discount that must be included for each period is equal to the
lesser of (i) the amount of market discount accruing during such period (plus
any accrued market discount for prior periods not previously taken into account)
or (ii) the amount of
16
<PAGE>
the principal payment with respect to such period. Generally, market
discount accrues on a daily basis for each day the debt security is held by the
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of the Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest. Gain realized on the
disposition of a market discount obligation must be recognized as ordinary
income (not capital gain) to the extent of the "accrued market discount."
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a
shareholder as ordinary income, whether paid in cash or reinvested in Fund
shares. Dividends paid by a Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received by the Fund from U.S.
corporations, may, subject to limitation, be eligible for the dividends received
deduction. However, the alternative minimum tax applicable to corporations may
reduce the value of the dividends received deduction.
The excess of net long-term capital gains over the short-term capital
losses realized and distributed by a Fund, whether paid in cash or reinvested in
Fund shares, will generally be taxable to shareholders as long-term capital
gain, regardless of how long a shareholder has held Fund shares.
Shareholders will be notified annually as to the U.S. federal tax status
of distributions, and shareholders receiving distributions in the form of
newly issued shares will receive a report as to the net asset value of the
shares received.
DISPOSITIONS
Upon a redemption, sale or exchange of Fund shares, a shareholder will realize
a taxable gain or loss depending upon his or her basis in the shares. A gain
or loss will be treated as capital gain or loss if the shares are capital assets
in the shareholder's hands, and the rate of tax will depend upon the
shareholder's holding period for the shares. Any loss realized on a redemption,
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including through reinvestment of dividends) within a period of 61
days, beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case the basis of the shares acquired will be adjusted to reflect
the disallowed loss. If a shareholder holds Fund shares for six months or less
and during that period receives a distribution taxable to the shareholder
as long-term capital gain, any loss realized on the sale of such shares during
such six-month period would be a long-term loss to the extent of such
distribution.
17
<PAGE>
APPENDIX
Bond Rating Categories as defined by Standard & Poor's (S & P) are quoted
in part and inserted herein for the information of potential investors in the
FAM Funds as a reference as follows:
An S&P corporate or municipal debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligers such as guarantors,
insurers or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or withdrawn as a
result of changes in, or availability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligor;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors rights.
AAA- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
18
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Declaration of Trust (1)
(b) By-Laws (1)
(c) Not Applicable
(d)(i) Investment Advisory Agreement between Registrant
and Fenimore Asset Management, Inc. with respect to
FAM Value Fund(1)
(ii) Investment Advisory Agreement between Registrant
and Fenimore Asset Management, Inc. with respect to
FAM Equity-Income Fund(1)
(e) Not Applicable
(f) Not Applicable
(g) Custodian Agreement between Registrant and
Firstar Bank, N.A.
(h)(i) Shareholder Services Agreement(1)
(ii) Fund Accounting Agreement(1)
<PAGE>
(i) Opinion and Consent of Legal Counsel (1)
(j) Consents of Independent Accountants
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Not Applicable
(p) Codes of Ethics (2)
- ----------------------
(1) Filed previously and incorporated by reference herein.
(2) To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 25. Indemnification
Reference is made to Article IV, Section 4.3, of the Registrant's
Declaration of Trust.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to
the Declaration of Trust or otherwise, the Registrant is aware that in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and,
therefore, is 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 trustees, officers or
controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted by such
trustees, officers or controlling persons in connection with the
shares being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
C-2
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issues.
Item 26. Business and Other Connections of Investment Adviser
Fenimore Asset Management, Inc. serves as the investment adviser for
the Registrant. The business and other connections of Fenimore Asset
Management, Inc. are set forth in the Uniform Application for
Investment Adviser Registration ("Form ADV") of Fenimore Asset
Management, Inc. as currently filed with the SEC which is incorporated
by reference herein.
Item 27. Principal Underwriter
Not Applicable.
Item 28. Location of Accounts and Records
The accounts, books, and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and rules promulgated thereunder are in the possession of
Fenimore Asset Management, Inc., and FAM Shareholder Services, Inc.,
118 North Grand Street, Cobleskill, New York 12043.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings.
(a) None.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 25 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington in the
District of Columbia on the 28th day of April, 2000.
FENIMORE ASSET MANAGEMENT TRUST
By: /s/ Thomas O. Putnam
----------------------------
Thomas O. Putnam, President*
*By: /s/ Patrick W.D. Turley
----------------------------------------
Patrick W.D. Turley, as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
Signature Title Date
- --------- ----- ----
/s/Thomas O. Putnam President and April 28, 2000
Thomas O. Putnam* Chairman of the
Board of Trustees
(Principal Executive
Officer)
/s/Bernard H. Zais Trustee April 28, 2000
Bernard H. Zais*
/s/Roger A. Hannay Trustee April 28, 2000
Roger A. Hannay*
/s/Joseph J. Bulmer Trustee April 28, 2000
Joseph J. Bulmer**
/s/ Fred Lager Trustee April 28, 2000
Fred Lager***
/s/ Thomas O. Putnam Treasurer April 28, 2000
Thomas O. Putnam (Principal Financial
and Accounting Officer)
*By: /s/Patrick W.D. Turley
----------------------
Patrick W.D. Turley
as attorney-in-fact
* Pursuant to power of attorney filed with Post-Effective Amendment No.12
as filed on April 29, 1994.
** Pursuant to power of attorney filed with Post-Effective Amendment No.21
as filed on May 1, 1997.
*** Pursuant to power of attorney filed with Post-Effective Amendment No.22
as filed on May 1, 1998.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED
WITH
POST-EFFECTIVE AMENDMENT NO. 25
TO THE
REGISTRATION STATEMENT
OF
FENIMORE ASSET MANAGEMENT TRUST
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 25)
-----------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
(j) Consents of Independent Auditors
(g) Custodian Agreement Between Registrant
and Firstar Bank, N.A.
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated January 12, 2000, relating to the
financial statements and financial highlights which appear in the December 31,
1999 annual report to shareholders of FAM Value Fund and FAM Equity Income Fund,
a series of Fenimore Asset Management Trust which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights" and "Custodian and Auditors" in
such Registration Statement.
PricewaterhouseCoopers LLP
New York, NY
April 26, 2000
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated January 11, 1999 on the
financial statements of FAM Value Fund and FAM Equity-Income Fund, each a series
of Fenimore Asset Management Trust referred to therein in Post-Effective
Amendment No. 25 to the Registration Statement on Form N-1A, File No. 33-7190,
as filed with the Securities and Exchange Commission.
McGladrey & Pullen, LLP
New York, New York
April 27, 2000
<PAGE>
INDEPENDENT AUDITOR'S REPORT
THE BOARD OF TRUSTEES AND SHAREHOLDERS
FAM VALUE FUND AND FAM EQUITY-INCOME FUND
We have audited the accompanying statement of changes in net assets for the year
ended December 31, 1998 and the financial highlights for each of the four years
in the period ended December 31, 1998 of FAM Value Fund and FAM Equity-Income
Fund, each a series of Fenimore Asset Management Trust. This financial statement
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statement and financial highlights referred to
above present fairly, in all material respects, the changes in its net assets
and the financial highlights of FAM Value Fund and the FAM Equity-Income Fund
for the periods indicated, in conformity with generally accepted accounting
principles.
McGladrey & Pullen, LLP
New York, New York
January 11, 1999
CUSTODY AGREEMENT
This agreement (the "Agreement") is entered into as of the 5th
day of May 1999 by and between Fenimore Asset Management Trust, (the
"Trust"), an open-end diversified investment business trust organized
under the laws of Massachusetts, consisting of those separate investment
series as set forth on Appendix E (the "Funds") and having its office at
111 North Grand Street, Cobleskill, New York 12043 and Firstar Bank,
National Association, (the "Custodian"), a national banking association
having its principal office at 425 Walnut Street, Cincinnati, Ohio,
45202.
WHEREAS, the Trust and the Custodian desire to enter into this
Agreement to provide for the custody and safekeeping of the assets of the
Funds as required by the Investment Company Act of 1940, as amended (the
"Act").
WHEREAS, the Trust hereby appoints the Custodian as custodian
of all the Funds Securities and moneys at any time owned by the Funds
during the term of this Agreement (the "Fund Assets").
WHEREAS, the Custodian hereby accepts such appointment as
Custodian and agrees to perform the duties thereof as hereinafter set
forth.
THEREFORE, in consideration of the mutual promises hereinafter
set forth, the Trust and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
-----------
The following words and phrases, when used in this Agreement,
unless the context otherwise requires, shall have the following meanings:
AUTHORIZED PERSON - the Chairman, President, Secretary, Treasurer, Controller,
or Senior Vice President of the Funds, or any other person, whether or not any
such person is an officer or employee of the Fund, duly authorized by the Board
of Trustees of the Funds to give Oral Instructions and Written Instructions on
behalf of the Funds, and listed in the Certificate annexed hereto as Appendix A,
or such other Certificate as may be received by the Custodian from time to time.
<PAGE>
BOOK-ENTRY SYSTEM - the Federal Reserve Bank book-entry system
for United States Treasury securities and federal agency securities.
CERTIFICATE- A written certificate signed by the Secretary of
the Trust certifying the actions taken by the Board of Trustees.
DEPOSITORY - The Depository Trust Company ("DTC"), a 1imited
purpose trust company its successor(s) and its nominee(s) or any other
person or clearing agent.
FOREIGN SECURITIES - a) securities issued and sold primarily
outside of the United States by a foreign government, a national of any
foreign country, or a trust or other organization incorporated or
organized under the laws of any foreign country OR; b) securities issued
or guaranteed by the government of the United States, by any state, by
any political subdivision or agency thereof, or by any entity organized
under the laws of the United States or of any state thereof, which have
been issued and sold primarily outside of the United States.
MONEY MARKET SECURITY - debt obligations issued or guaranteed
as to principal and/or interest by the government of the United States or
agencies or instrumentalities thereof, commercial paper, obligations
(including certificates of deposit, bankers' acceptances, repurchase
agreements and reverse repurchase agreements with respect to the same),
and time deposits of domestic banks and thrift institutions whose
deposits are insured by the Federal Deposit Insurance Corporation, and
short-term corporate obligations where the purchase and sale of such
securities normally require settlement in federal funds or their
equivalent on the same day as such purchase and sale, all of which mature
in not more than thirteen (13) months.
OFFICERS - the Chairman, President, Secretary, Treasurer,
Controller, and Senior Vice President of the Funds listed in the
Certificate annexed hereto as Appendix A, or such other Certificate as
may be received by the Custodian from time to time.
ORAL INSTRUCTIONS - verbal instructions received by the
Custodian from an Authorized Person (or from a person that the
Custodian reasonably believes in good faith to be an
Authorized Person) and confirmed by Written Instructions in
such a manner that such Written Instructions are received by
the Custodian on the business day immediately following
receipt of such Oral Instructions.
PROSPECTUS - the Funds then currently effective prospectus and
Statement of Additional Information, as filed with and declared effective
from time to time by the Securities and Exchange Commission.
SECURITY OR SECURITIES - Money Market Securities, common stock,
preferred stock, options, financial futures, bonds, notes, debentures,
corporate debt securities, mortgages, and any certificates, receipts,
warrants, or other instruments representing rights to receive, purchase,
or subscribe for the same or evidencing or representing any other rights
or interest therein, or any property or assets.
2
<PAGE>
WRITTEN INSTRUCTORS - communication received in writing by the
Custodian from an Authorized Person.
ARTICLE II
DOCUMENTS AND NOTICES TO BE FURNISHED BY THE TRUST
--------------------------------------------------
A. The following documents, including any amendments thereto,
will be provided contemporaneously with the execution of the Agreement,
to the Custodian by the Trust:
1. A copy of the Declaration of Trust of the Trust
certified by the Secretary.
2. A copy of the By-Laws of the Trust certified by the
Secretary.
3. A copy of the resolution of the Board of Trustees of the
Trust appointing the Custodian, certified by the Secretary.
4. A copy of the then current Prospectus.
5. A Certificate of the President and Secretary of the
Trust setting forth the names and signatures of the Officers of
the Trust.
B. The Trust agrees to notify the Custodian in writing of the
appointment of any Dividend and Transfer Agent.
ARTICLE III
RECEIPT OF FUND ASSETS
----------------------
A. During the term of this Agreement, the Fund will deliver or
cause to be delivered to the Custodian all moneys constituting Fund
Assets. The Custodian shall be entitled to reverse any deposits made on
the Fund's behalf where such deposits have been entered and moneys are
not finally collected within 30 days of the making of such entry.
B. During the term of this Agreement, the Fund will deliver or
cause to be delivered to the Custodian all Securities constituting Fund
Assets. The Custodian will not have any duties or responsibilities with
respect to such Securities until actually received by the Custodian.
C. As and when received, the Custodian shall deposit to the
account(s) of the Fund any and all payments for shares of the Fund issued
or sold from time to time as they are received from the Fund.
3
<PAGE>
ARTICLE IV
DISBURSEMENTS OF FUND ASSETS
----------------------------
A. The Trust shall furnish to the Custodian a copy of the
resolution of the Board of Trustees of the Trust, certified by the
Trust's Secretary, either (i) setting forth the date of the declaration
of any dividend or distribution in respect of shares of the Fund, the
date of payment thereof, the record date as of which Fund shareholders
entitled to payment shall be determined, the amount payable per share to
Fund shareholders of record as of that date, and the total amount to be
paid by the Dividend and Transfer Agent on the payment date, OR (ii)
authorizing the declaration of dividends and distributions in respect of
shares of the Fund on a daily basis and authorizing the Custodian to rely
on a Certificate setting forth the date of the declaration of any such
dividend or distribution, the date of payment thereof, the record date as
of which Fund shareholders entitled to payment shall be determined, the
amount payable per share to Fund shareholders of record as of that date,
and the total amount to be paid by the Dividend and Transfer Agent on the
payment date.
On the payment date specified in such resolution or
Certificate described above, the Custodian shall segregate such amounts
from moneys held for the account of each Fund so that they are available
for such payment.
B. Upon receipt of Written Instructions so directing it, the
Custodian shall segregate amounts necessary for the payment of redemption
proceeds to be made from moneys held for the account of the Fund so that
they are available for such payment.
C. Upon receipt of a Certificate directing payment and setting
forth the name and address of the person to whom such payment is to be
made, the amount of such payment, and the purpose for which payment is to
be made, the Custodian shall disburse amounts as and when directed from
the Fund Assets. The Custodian is authorized to rely on such directions
and shall be under no obligation to inquire as to the propriety of such
directions.
D. Upon receipt of a Certificate directing payment, the
Custodian shall disburse moneys from the Fund Assets in payment of the
Custodian's fees and expenses as provided in Article VIII hereof.
ARTICLE V
CUSTODY OF FUND ASSETS
----------------------
A. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Agreement, and shall hold all cash received by it from or for the
4
<PAGE>
account of the Fund, other than cash maintained by the Fund in a bank
account established and used by the Fund in accordance with Rule 17f-3
under the Act. Moneys held by the Custodian on behalf of the Fund may be
deposited by the Custodian to its credit as Custodian in the banking
department of the Custodian. Such moneys shall be deposited by the
Custodian in its capacity as such, and shall be withdrawable by the
Custodian only in such capacity.
B. The Custodian shall hold all Securities delivered to it in
safekeeping in a separate account or accounts maintained at Firstar Bank,
N.A. for the benefit of the Fund.
C. All Securities held which are issued or issuable only in
bearer form, shall be held by the Custodian in that form; all other
Securities held for the Fund shall be registered in the name of the
Custodian or its nominee. The Fund agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold, or deliver in
proper form for transfer, any Securities that it may hold for the account
of the Fund and which may, from time to time, be registered in the name
of the Fund.
D. With respect to all Securities held for the Fund, the
Custodian shall on a timely basis (concerning items 1 and 2 below, as
defined in the Custodian's Standards of Service Guide, as amended from
time to time, annexed hereto as Appendix C):
1.) Collect all income due and payable with respect to
such Securities;
2.) Present for payment and collect amounts payable upon
all Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
3.) Surrender Securities in temporary form, for definitive
Securities; and
4.) Execute, as agent, any necessary declarations or
certificates of ownership under the Federal income tax laws or
the laws or regulations of any other taxing authority,
including any foreign taxing authority, now or hereafter in
effect.
E. Upon receipt of a Certificate AND NOT OTHERWISE, the
Custodian shall:
1.) Execute and deliver to such persons as may be designated in
such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as beneficial owner of
any Securities may be exercised;
2.) Deliver any Securities in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation, or recapitalization of any trust,
or the exercise of any conversion privilege;
3.) Deliver any Securities to any protective committee,
reorganization committee, or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization,
or sale of assets of any trust, and receive and hold under the terms of
this Agreement such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such
delivery;
5
<PAGE>
4.) Make such transfers or exchanges of the assets of the Fund
and take such other steps as shall be stated in said Certificate to be
for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization
of the Fund; and
5.) Deliver any Securities held for the Trust to the depository
agent for tender or other similar offers.
F. The Custodian shall promptly deliver to the Trust all notices,
proxy material and executed but unvoted proxies pertaining to shareholder
meetings of Securities held by any Fund. The Custodian shall not vote or
authorize the voting of any Securities or give any consent, waiver or approval
with respect thereto unless so directed by a Certificate or Written Instruction
G. The Custodian shall deliver on a timely basis to the Fund all
information received by the Custodian and pertaining to Securities held by the
Fund with respect to tender or exchange offers, calls for redemption or
purchase, or expiration of rights.
ARTICLE VI
PURCHASE AND SALE OF SECURITIES
-------------------------------
A. Promptly after each purchase of Securities by a Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, Written Instructions, and (ii) with
respect to each purchase of Money Market Securities, Written Instructions or
Oral Instructions, specifying with respect to each such purchase the;
1.) name of the issuer and the title of the Securities,
2.) principal amount purchased and accrued interest, if any,
3.) date of purchase and settlement,
4.) purchase price per unit,
5.) total amount payable, and
6.) name of the person from whom, or the broker through
which, the purchase was made.
The Custodian shall, against receipt of Securities purchased by or for a Fund,
pay out of the Fund Assets, the total amount payable to the person from whom or
the broker through which the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
6
<PAGE>
B. Promptly after each sale of Securities by a Fund, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, Written Instructions,
and (ii) with respect to each sale of Money Market Securities, Written
Instructions or Oral Instructions, specifying with respect to each such
sale the;
1.) name of the issuer and the title of the Securities,
2.) principal amount sold and accrued interest, if any,
3.) date of sale and settlement,
4.) sale price per unit,
5.) total amount receivable, and
6.) name of the person to whom, or the broker through which,
the sale was made,
The Custodian shall deliver the Securities against receipt of a total
amount receivable, provided that the same conforms to the total amount
receivable as set forth in such Written Instructions or Oral
Instructions, as the case may be.
C. On contractual settlement date, the account of the Fund will
be charged for all purchased Securities settling on that day, regardless
of whether or not delivery is made. Likewise, on contractual settlement
date, proceeds from the sale of Securities settling that day will be
credited to the account of the Fund, irrespective of delivery.
D. Purchases and sales of Securities effected by the Custodian
will be made on a delivery versus payment basis. The Custodian may, in
its sole discretion, upon receipt of a Certificate, elect to settle a
purchase or sale transaction in some other manner, but only upon receipt
of acceptable indemnification from the Fund.
E. The Custodian shall, upon receipt of a Written Instruction
so directing it, establish and maintain a segregated account or accounts
for and on behalf of the Fund. Cash and/or Securities may be transferred
into such account or accounts for specific purposes, to-wit:
1.) in accordance with the provision of any
agreement among the Fund, the Custodian,
and a broker-dealer registered under the
Securities and Exchange Act of 1934, as
amended, and also a member of the National
Association of Securities Dealers (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, the Commodity Futures Trading
Commission, any registered contract market,
or any similar organization or
organizations requiring escrow or other
similar arrangements in connection with
transactions by the Fund;
7
<PAGE>
2.) for purposes of segregating cash or government securities
in connection with options purchased, sold, or written by
the Fund or commodity futures contracts or options
thereon purchased or sold by the Fund;
3.) for the purpose of compliance by the fund with the
procedures required for reverse repurchase agreements,
firm commitment agreements, standby commitment
agreements, and short sales by Act Release No. 10666. or
any subsequent release or releases or rule of the
Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered
investment companies; and
4.) for other corporate purposes, ONLY IN THE CASE OF THIS
CLAUSE 4 upon receipt of a copy of a resolution of the
Board of Trustees of the Fund, certified by the Secretary
of the Fund, setting forth the purposes of such
segregated account.
F. Except as otherwise may be agreed upon by the parties
hereto, the Custodian shall not be required to comply with any Written
Instructions to settle the purchase of any Securities on behalf of the
Fund unless there is sufficient cash in the account(s) at the time or to
settle the sale of any Securities from an account(s) unless such
Securities are in deliverable form. Notwithstanding the foregoing, if the
purchase price of such Securities exceeds the amount of cash in the
account(s) at the time of such purchase, the Custodian may, in its sole
discretion, advance the amount of the difference in order to settle the
purchase of such Securities. The amount of any such advance shall be
deemed a loan from the Custodian to the Fund payable on demand and
bearing interest accruing from the date such loan is made up to but not
including the date such loan is repaid at a rate per annum customarily
charged by the Custodian on similar loans.
ARTICLE VII
FUND INDEBTEDNESS
-----------------
In connection with any borrowings by a Fund, the Fund will
cause to be delivered to the Custodian by a bank or broker requiring
Securities as collateral for such borrowings (including the Custodian if
the borrowing is from the Custodian), a notice or undertaking in the form
currently employed by such bank or broker setting forth the amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing:
8
<PAGE>
(a) the name of the bank or broker, (b) the amount and terms of the
borrowing, which may be set forth by incorporating by reference an
attached promissory note duly endorsed by the Fund, or a
loan agreement, (c) the date, and time if known, on which the loan is to
be entered into, (d) the date on which the loan becomes due and payable,
(e) the total amount payable to the Fund on the borrowing date, and (f)
the description of the Securities securing the loan, including the name
of the issuer, the title and the number of shares or the principal
amount. The Custodian shall deliver on the borrowing date specified in
the Certificate the required collateral against the lender's delivery of
the total loan amount then payable, provided that the same conforms to
that which is described in the Certificate. The Custodian shall deliver,
in the manner directed by the Fund, such Securities as additional
collateral, as may be specified in a Certificate, to secure further any
transaction described in this Article VII. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian and the Custodian shall receive from time to time such return
of collateral as may be tendered to it.
The Custodian may, at the option of the lender, keep such
collateral in its possession, subject to all rights therein given to the
lender because of the loan. The Custodian may require such reasonable
conditions regarding such collateral and its dealings with third-party
lenders as it may deem appropriate.
ARTICLE VIII
CONCERNING THE CUSTODIAN
------------------------
A. Except as otherwise provided herein, the Custodian shall not
be liable for any loss or damage resulting from its action or omission to
act or otherwise, except for any such loss or damage arising out of its
own gross negligence or willful misconduct. The Fund shall defend,
indemnify, and hold harmless the Custodian and its Trustees, officers,
employees and agents with respect to any loss, claim, liability or cost
(including reasonable attorneys' fees) arising or alleged to arise from
or relating to the Fund's duties hereunder or any other action or
inaction of the Fund or its Trustees, officers, employees or agents,
except such as may arise from the negligent action, omission, willful
misconduct or breach of this Agreement by the Custodian. The Custodian
may, with respect to questions of law, apply for and obtain the advice
and opinion of counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with the advice or opinion of counsel. The provisions under
this paragraph shall survive the termination of this Agreement.
B. Without limiting the generality of the foregoing, the
Custodian, acting in the capacity of Custodian hereunder, shall be under
no obligation to inquire into, and shall not be liable for:
9
<PAGE>
1.) The validity of the issue of any Securities purchased by or for the
account of the Fund, the legality of the purchase thereof, or the
propriety of the amount paid therefor;
2.) The legality of the sale of any Securities by or for the account of
the Fund, or the propriety of the amount for which the same are sold;
3.) The legality of the issue or sale of any shares of the Fund, or the
sufficiency of the amount to be received therefor;
4.) The legality of the redemption of any shares of the Fund, or the
propriety of the amount to be paid therefor;
5.) The legality of the declaration or payment of any dividend by the Fund
in respect of shares of the Fund,
6.) The legality of any borrowing by the Fund on behalf of the Fund, using
Securities as collateral;
C. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from any
Dividend and Transfer Agent of the Fund nor to take any action to effect
payment or distribution by any Dividend and Transfer Agent of the Fund of
any amount paid by the Custodian to any Dividend and Transfer Agent of
the Fund in accordance with this Agreement.
D. Notwithstanding Section D of Article V, the Custodian shall
not be under any duty or obligation to take action to effect collection
of any amount, if the Securities upon which such amount is payable are in
default, or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction (including
prepayment thereof) of reimbursement of its costs and expenses in
connection with any such action.
E. The Fund acknowledges and hereby authorizes the Custodian to
hold Securities through its various agents described in Appendix B
annexed hereto. The Fund hereby represents that such authorization has
been duly approved by the Board of Trustees of the Fund as required by
the Act. The Custodian acknowledges that although certain Fund Assets are
held by its agents, the Custodian remains primarily liable for the
safekeeping of the Fund Assets.
10
<PAGE>
In addition, the Fund acknowledges that the Custodian may
appoint one or more financial institutions, as agent or agents or as
sub-custodian or sub-custodians, including, but not limited to, banking
institutions located in foreign countries, for the purpose of holding
Securities and moneys at any time owned by the Fund. The Custodian shall
not be relieved of any obligation or liability under this Agreement in
connection with the appointment or activities of such agents or
sub-custodians. Any such agent or sub-custodian shall be qualified to
serve as such for assets of investment companies registered under the
Act. Upon request, the Custodian shall promptly forward to the Fund any
documents it receives from any agent or sub-custodian appointed hereunder
which may assist trustees of registered investment companies to fulfill
their responsibilities under Rule 17f-5 of the Act.
F. The Custodian shall not be under any duty or obligation
to ascertain whether any Securities at any time delivered to or held by
it for the account of the Fund are such as properly may be held by the
Fund under the provisions of the Declaration of Trust and the Fund's By
Laws.
G. The Custodian shall treat all records and other information
relating to the Fund and the Fund Assets as confidential and shall not
disclose any such records or information to any other person unless (i)
the Fund shall have consented thereto in writing or (ii) such disclosure
is required by law.
H. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian such compensation as shall be determined
pursuant to Appendix D attached hereto, or as shall be determined
pursuant to amendments to such Appendix D. The Custodian shall be
entitled to charge against any money held by it for the account of the
Fund, the amount of any of its fees, any loss, damage, liability or
expense, including counsel fees. The expenses which the Custodian may
charge against the account of the Fund include, but are not limited to,
the expenses of agents or sub-custodians incurred in settling
transactions involving the purchase and sale of Securities of the Fund.
11
<PAGE>
I. The Custodian shall be entitled to rely upon any Oral
Instructions and any Written Instructions. The Fund agrees to forward to
the Custodian Written Instructions confirming Oral Instructions in such a
manner so that such Written Instructions are received by the Custodian,
whether by hand delivery, facsimile or otherwise, on the same business
day on which such Oral Instructions were given. The Fund agrees that the
failure of the Custodian to receive such confirming instructions shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the
Custodian shall incur no liability to the Fund for acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions.
J. The Custodian will (i) set up and maintain proper books of
account and complete records of all transactions in the accounts
maintained by the Custodian hereunder in such manner as will meet the
obligations of the Fund under the Act, with particular attention to
Section 31 thereof and Rules 3 la-I and 3 Ia-2 thereunder and those
records are the property of the Fund, and (ii) preserve for the periods
prescribed by applicable Federal statute or regulation all records
required to be so preserved. All such books and records shall be the
property of the Fund, and shall be open to inspection and audit at
reasonable times and with prior notice by Officers and auditors employed
by the Fund.
K. The Custodian shall send to the Fund any report received on
the systems of internal accounting control of the Custodian, or its
agents or sub-custodians, as the Fund may reasonably request from time to
time.
L. The Custodian performs only the services of a custodian and
shall have no responsibility for the management, investment or
reinvestment of the Securities from time to time owned by the Fund. The
Custodian is not a selling agent for shares of the Fund and performance
of its duties as custodian shall not be deemed to be a recommendation to
the Fund's depositors or others of shares of the Fund as an investment
M. The Custodian shall take all reasonable action, that the
Fund may from time to time request, to assist the Fund in obtaining
12
<PAGE>
favorable opinions from the Fund's independent accountants, with respect
to the Custodians activities hereunder, in connection with the
preparation of the Fund's Form N-IA. Form N-SAR, or other annual reports
to the Securities and Exchange Commission.
N. The Fund hereby pledges to and grants the Custodian a
security interest in any Fund Assets to secure the payment of any
liabilities of the Fund to the Custodian, whether acting in its capacity
as Custodian or otherwise, or on account of money borrowed from the
Custodian. This pledge is in addition to any other pledge of collateral
by the Fund to the Custodian.
<PAGE>
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; 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 such failure or delay.
ARTICLE X
TERMINATION
-----------
A. Either of the parties hereto may terminate this Agreement for any reason
by giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of
giving of such notice. If such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Trustees of the Fund,
certified by the Secretary of the Fund, electing to terminate this Agreement and
13
<PAGE>
designating a successor custodian or custodians. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, designating a successor custodian or
custodians to act on behalf of the Fund. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $100,000,000 aggregate capital,
surplus, and undivided profits. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian, provided that it has received a
notice of acceptance by the successor custodian, shall deliver, on that date,
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian. Upon termination of this Agreement, the Fund
shall pay to the Custodian on behalf of the Fund such compensation as may be due
as of the date of such termination. The Fund agrees on behalf of the Fund that
the Custodian shall be reimbursed for its reasonable costs in connection with
the termination of this Agreement.
B. If a successor custodian is not designated by the Fund, or by the
Custodian in accordance with the preceding paragraph, or the designated
successor cannot or will not serve, the Fund shall, upon the delivery by the
Custodian to the Fund of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund, be deemed to be the custodian for the Fund, and the Custodian shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in the Book-Entry
System, which cannot be delivered to the Fund, which shall be held by the
Custodian in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
A. Appendix A sets forth the names and the signatures of all
Authorized Persons, as certified by the Secretary of the Fund. The Fund agrees
to furnish to the Custodian a new Appendix A in form similar to the attached
Appendix A, if any present Authorized Person ceases to be an Authorized Person
or if any other or additional Authorized Persons are elected or appointed. Until
such new Appendix A shall be received, the Custodian shall be fully protected in
acting under the provisions of this Agreement upon Oral Instructions or
signatures of the then current Authorized Persons as set forth in the last
delivered Appendix A.
B. No recourse under any obligation of this Agreement or for any
claim based thereon shall be had against any organizer, shareholder, Officer,
Trustee, past, present or future as such, of the Fund or of any predecessor or
successor, either directly or through the Fund or any such predecessor or
successor, whether by virtue of any constitution, statute or rule of law or
equity, or be the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that this Agreement and the obligations
thereunder are enforceable solely against the Fund, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
organizers, shareholders, Officers, Trustees of the Fund or of any predecessor
or successor, or any of them as such. To the extent that any such liability
exists, it is hereby expressly waived and released by the Custodian as a
condition of, and as a consideration for, the execution of this Agreement.
C. The obligations set forth in this Agreement having been made by
the Fund have been made by the Board of Trustees, acting as such Trustees for
and on behalf of the Fund, pursuant to the authority vested in them under the
laws of the State of Massachusetts, the Declaration Of Trust and the By-Laws of
the Fund. This Agreement has been executed by Officers of the Fund as officers,
and not individually, and the obligations contained herein are not binding upon
any of the Trustees, Officers, agents or holders of shares, personally, but bind
only the Fund.
D. Provisions of the Prospectus and any other documents (including
advertising material) specifically mentioning the Custodian (other than merely
by name and address) shall be reviewed with the Custodian by the Fund prior to
publication and/or dissemination or distribution, and shall be subject to the
consent of the Custodian.
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<PAGE>
E. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at
Firstar Bank Center, 425 Walnut Street, M. L. 6118, Cincinnati, Ohio 45202,
attention Mutual Fund Custody Department, or at such other place as the
Custodian may from time to time designate in writing.
F. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given when
delivered to the Fund or on the second business day following the time such
notice is deposited in the U.S. mail postage prepaid and addressed to the Fund
at its office at 111 North Grand Street, Cobleskill, New York 12043, Attn: Monte
Thompson, or at such other place as the Fund may from time to time designate in
writing.
G. This Agreement, with the exception of the Appendices, may not be
amended or modified in any material manner except by a written agreement
executed by both parties with the same formality as this Agreement, and
authorized and approved by a resolution of the Board of Trustees of the Fund.
H. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund or by the Custodian, and
no attempted assignment by the Fund or the Custodian shall be effective without
the written consent of the other party hereto,
I. This Agreement shall be construed in accordance with the laws of
the State of Ohio.
J. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Officers, thereunto duly authorized as of the
day and year first above written.
16
<PAGE>
ATTEST: FENIMORE ASSET MANAGEMENT TRUST
__________________ By: /S/ DIANE VAN BUREN
Diane Van Buren
Title: TREASURER
ATTEST:
FIRSTAR BANK, N.A.
- ------------------
By: /S/ MARSHA A. CROXTON
Marsha A. Croxton
Senior Vice President
18
<PAGE>
APPENDIX A
AUTHORIZED PERSONS SPECIMEN SIGNATURES
------------------ -------------------
President: ______________ ______________
Secretary: ______________ ______________
Treasurer: ______________ ______________
Controller: ______________ ______________
Adviser Employees: ______________ ______________
Transfer Agent/Fund Accountant
Employees:
-------------- --------------
-------------- --------------
-------------- --------------
-------------- --------------
19
<PAGE>
APPENDIX B
The following agents are employed currently by Firstar Bank, N.A. for securities
processing and control...
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank
Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible Securities)
20
<PAGE>
APPENDIX C
STANDARDS OF SERVICE GUIDE
FIRSTAR BANK NA.
MAIL LOCATION #6118
425 WALNUT STREET,
CINCINNATI, OH 45202
JUNE, 1988
<PAGE>
FIRSTAR BANK, N.A.
STANDARDS OF SERVICE GUIDE
Firstar Bank, NA. is committed to providing superior quality
service to all customers .-. 4 their agents at all times. We have compiled
this guide as a tool for OUR clients to determine our standards for the
processing of security settlements, payment collection, and capital change
transactions. Deadlines recited in this guide represent the times required
for Firstar Bank to guarantee processing. Failure to meet these deadlines
will result in settlement at our client's risk. In all cases, Firstar Bank
will make every effort to complete all processing on a timely basis.
Firsts Bank is a direct participant of the Depository Trust
Company, a direct member of the Federal Reserve Bank of Cleveland, d
utilizes the Bankers Trust Company as its agent for ineligible d foreign
securities.
For corporate reorganizations, Firstar Bank utilizes SEI's Reorg
Source, Financial Information, Inc., XCITEK, DTC Important Notices, and the
WALL STREET JOURNAL.
For bond calls and mandatory puts, Firstar Bank utilizes SEIs Bond
Source, Kenny information Systems, Standard & Poor's Corporation, and DTC
Important Notices. Firstar Bank will not notify clients of optional put
opportunities.
Any securities delivered free to Firstar Bank or its agents must
be received three (3) business days prior to any payment or settlement in
order for the Firsts Bank standards of service to apply.
Should you have any questions regarding the information contained
in this guide, please feel free to contact your account representative.
THE INFORMATION CONTAINED IN THIS STANDARDS OF SERVICE GUIDE IS
SUBJECT TO CHANGE. SHOULD ANY CHANGES BE MADE FLRSTAR BANK WILL
PROVIDE YOU WITH AN UPDATED COPY OF ITS STANDARDS OF SERVICE GUIDE.
<PAGE>
<TABLE>
<CAPTION>
FIRSTAR BANK SECURITY SETTLEMENT STANDARDS
<S> <C> <C>
TRANSACTION TYPE INSTRUCTIONS DEADLINES* DELIVERY INSTRUCTIONS
- ---------------- ----------------------- ---------------------
DTC 1:30 P.M. on Settlement Date DTC Participant #2219
Agent Bank ID 27895
Institutional # _______
For Account # ____________
Federal Reserve Book Entry 12:30 P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
For Firstar Bank, N.A. ABA #042000013
For Account # ___
Federal Reserve Book Entry (Repurchase 1:00P.M. on Settlement Date Federal Reserve Bank of Cinti/Trust
Agreement Collateral Only) For Firstar Bank, N.A. ABA #042000013
For Account #
PTC Securities l2:00 P.M. on Settlement Date PTC for Account BTRST/CUST
(GNMA Book Entry) Sub Account: Firstar Bank, N.A. #090334
Physical Securities 9:30 AM. EST on Settlement Date Bankers Trust Company
(for Deliveries by 4:00 P.M. on Settlement 16 Wall Street 4th Floor, Window 43
Date minus I) for Firstar Bank Account #090334
Euroclear Via Cedel Bridge
CEDELIEURO-CLEAR 11:00A.M. on Settlement Date minus 2 In favor of Bankers Trust Comp
Cedel 53355
For Firstar Bank Account #501526354
Firstar Bank, N.A. Cinti/Trust ABA# 042000013
Cash WireTransfer 3:00 P.M. Credit Account #9901877
Further Credit to __________
Account # ______
<FN>
*All times listed are Eastern Standard Time.
</FN>
</TABLE>
<PAGE>
FIRSTAR BANK PAYMENT STANDARDS
SECURITY TYPE INCOME PRINCIPAL
- ------------- ------ ---------
Equities Payable Date
Municipal Bonds* Payable Date Payable Date
Corporate Bonds* Payable Date Payable Date
Federal Reserve Bank Book Entry* Payable Date Payable Date
PTC GNMA's (P&I) Payable Date + 1
Payable Date + 1
CMOs*
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
SBA Loan Certificates When Received When Received
Unit Investment Trust Certificates* Payable Date Payable Date
Certificates of Deposit* Payable Date + 1 Payable Date + 1
Limited Partnerships When Received When Received
Foreign Securities When Received When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry Payable Date Payable Date
DTC Payable Date + 1 Payable Date + 1
Bankers Trust Payable Date + 1 Payable Date + 1
NOTE: If a payable date falls on a weekend or bank holiday, payment will be made
on the immediately following business day
<PAGE>
FIRSTAR BANK CORPORATE REORGANIZATION STANDARDS
<TABLE>
<CAPTION>
TYPE OF ACTION NOTIFICATION TO CLIENT DEADLINE FOR CLIENT INSTRUCTIONS TRANSACTION
-------------- ---------------------- -------------------------------- -----------
<S> <C> <C> <C>
Rights, Warrants, Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
with Optional Mergers or receipt of notice
Mandatory Puts with Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
Option to Retain or receipt of notice
Class Actions 10 business days prior to expiration date 5 business days prior to expiration Upon receipt
Voluntary Tenders Later of 10 business days prior to expiration 5 business days prior to expiration Upon receipt
Exchanges or receipt of notice
and Conversions
Mandatory Puts, Defaults, At posting of funds or securities received None Upon receipt
Liquidations, Bankruptcies,
Stock Splits, Mandatory
Exchanges
Full and Partial Calls Later of 10 business days prior to expiration None Upon receipt
Or receipt of notice
<FN>
NOTE: Fractional shares/par amounts resulting from any of the above will be sold.
</FN>
</TABLE>
<PAGE>
APPENDIX D
FIRSTAR BANK, N.A.
DOMESTIC CUSTODY FEE SCHEDULE FOR FENIMORE ASSET MANAGEMENT
Firstar Bank, N.A., as Custodian, will receive monthly compensation
for services according to the terms of the following Schedule:
I. PORTFOLIO TRANSACTION FEES:
---------------------------
(a) For each repurchase agreement transaction $ 7.00
(b) For each portfolio transaction processed through
DTC or Federal Reserve $12.00
(c) For each portfolio transaction processed through
our New York custodian $25.00
(d) For each GNMA/Amortized Security Purchase $16.00
(e) For each GNMA Prin/Int Paydown, GNMA Sales $ 8.00
(f) For each option / future contract written,
exercised or expired $40.00
(g) For each Cedel/Euro clear transaction $80.00
(h) For each Disbursement (Fund expenses only) $ 5.00
A transaction is a purchase/sale of a security, free receipt/free delivery
(excludes initial conversion), maturity, tender or exchange.
II. MARKET VALUE FEE
----------------
Based upon an annual rate of: MILLION
.0001 (1 Basis Point) on First $200
.00008 (.8 of 1 Basis Point) on Balance
III. MONTHLY MINIMUM FEE-PER FUND $250.00
----------------------------
III. OUT-OF-POCKET EXPENSES
----------------------
The only out-of-pocket expenses charged to your account will be
shipping fees or transfer fees.
IV. IRA DOCUMENTS
-------------
Per Shareholder/year to hold each IRA Document $2.50
V. EARNINGS CREDITS
----------------
On a monthly basis any earnings credits generated form
uninvested custody balances will be applied against any cash
management service fees generated. Earnings credits are based
on a Cost of Funds Tiered Earnings Credit Rate.
*ASSUMES EXCLUSIVE USE OF FIRSTAR STELLAR MONEY MARKET FUNDS FOR INVESTMENT OF
SHORT TERM CASH.
Revised December 16, 1998
